LS15 - XED And YED

Question 1

XED

Answer 1

Measures responsiveness of demand for one good to changes in price of another
%change in qd for product A/%change in price of product

Substitute goods have positive, complements negative, unrelated 0

Question 2

XED values

Answer 2

Substitutes - positive values, 0.6 strong, 0.2 weak
Complements - negative values -0.6 strong, -0.2 weak

Question 3

YED

Answer 3

Responsiveness of demand to changes in income
Inferior goods negative YED, Normal goods positive
Between 0 and 1 normal goods classed as income inelastic and are necessities
Larger than 1 normal goods classed as income elastic and are luxuries