1.4 Elasticities

Question 1

PED

Answer 1

measures responsiveness of Qd following a change in price

Question 2

Factors affecting PED

Answer 2

SPLAT BD

Substitutes
Proportion of income spent on good
Luxury/necessity
Addictiveness
Time period

Branding (well-recognised -> inelastic)
Durability

Question 3

YED (income elasticity of demand)

Answer 3

measures responsiveness of Qd following a change in income

Question 4

XED (Cross elasticity of demand)

Answer 4

measures responsiveness of Qd of a good following a price change of another good

Question 5

Substitutes

Answer 5

Goods that meets the same needs, in competitive demand.
positive XED
(good A Qd increase
⎯⎯⎯⎯⎯⎯⎯⎯⎯
good B P increase)

Question 6

Complements

Answer 6

Goods that are consumed together, joint demand, negative XED
(Good A Qd decrease
⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯
Good B P increase)

Question 7

PES

Answer 7

measures responsiveness of Qs following a price change

Question 8

Factors affecting PES

Answer 8

AMELT
Availability of stock
Mobility of FOPs
Extent of spare capacity
Legal constraints
Time period