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WorksheetsCross and Income Elasticity
Total questions: 14
Worksheet time: 7mins
What does cross elasticity measure?
Measures responsiveness of changes in quantity demanded to changes in price.
Measures the responsiveness of the quantity demanded of
a good or service to a change in income.
Measures the responsiveness of the quantity demanded of one good to changes in price of another good.
What is the relationship between two good if Ex = -2
Substitutes
No relationship
Complements
What is the relationship between two goods if Ex = 5
Substitutes
No relationship
Complements
Calculate the co-efficient if the price of good A increased by 10% and the demand for good B fell by 5%
2
-2
0.5
-0.5
What type of good would have an Ey = 2
Luxury
Necessity
Inferior
What type of good would have an Ey = -4
Luxury
Necessity
Inferior
What type of good would have an Ey = 0.5
Luxury
Necessity
Inferior
What does income elasticity measure?
Measures responsiveness of changes in quantity demanded to changes in price.
Measures the responsiveness of the quantity demanded of
a good or service to a change in income.
Measures the responsiveness of the quantity demanded of one good to changes in price of another good.
Using the mid-point method calculate the income elasticity of demand coefficient of demand when income increases from 30 000 to 35 000 and the QD of chocolates increases from 10 000 to 15 000
0.38
2.6
26
3.8
What are inferior goods?
Lower quality goods that we consume when we are on lower incomes
Higher quality versions of goods that we consume more of as our incomes rise
Our basic needs. Things we need to survive e.g. housing clothing, food, power, transport
Goods that can be used in place of each other
Goods that we consume/use together
What are substitutes?
Lower quality goods that we consume when we are on lower incomes
Higher quality versions of goods that we consume more of as our incomes rise
Our basic needs. Things we need to survive e.g. housing clothing, food, power, transport
Goods that can be used in place of each other
Goods that we consume/use together
What are luxury goods?
Lower quality goods that we consume when we are on lower incomes
Higher quality versions of goods that we consume more of as our incomes rise
Our basic needs. Things we need to survive e.g. housing clothing, food, power, transport
Goods that can be used in place of each other
Goods that we consume/use together
What are complements?
Lower quality goods that we consume when we are on lower incomes
Higher quality versions of goods that we consume more of as our incomes rise
Our basic needs. Things we need to survive e.g. housing clothing, food, power, transport
Goods that can be used in place of each other
Goods that we consume/use together
What are necessities?
Lower quality goods that we consume when we are on lower incomes
Higher quality versions of goods that we consume more of as our incomes rise
Our basic needs. Things we need to survive e.g. housing clothing, food, power, transport
Goods that can be used in place of each other
Goods that we consume/use together
