LS15 XED & YED

Question 1

XED

Answer 1

Cross price elasticity of demand

Question 2

XED Formula

Answer 2

% change in the quantity demanded of product A / % change in price of product B

Question 3

Substitute Goods

Answer 3

These goods have a positive XED

Question 4

Complement Goods

Answer 4

Negative XED

Question 5

Unrelated Goods

Answer 5

0 XED

Question 6

Definition of XED

Answer 6

Cross price elasticity of demand (XED) measures the responsiveness of demand given a change in price of another good

Question 7

YED

Answer 7

Income elasticity of demand (YED) measures the responsiveness of demand given a a change in income

Question 8

YED Formula

Answer 8

% change in quantity demanded/ % change in income

Question 9

Inferior Good

Answer 9

Negative YED

Question 10

Normal Good

Answer 10

Positive YED

Question 11

Normal goods that have a YED between 0 and 1

Answer 11

These goods are classed as income inelastic and are necessities

Question 12

Normal goods that have a YED larger than 1

Answer 12

These goods are classed as being luxury goods

Question 13

What does a YED value serve to firms

Answer 13

It shows firms how sales will be affected by changes in the income of the population because YED measures how a change in income affects demand

Question 14

What does an XED value serve to firms

Answer 14

It allows firms to know how price changes by other firms may affect them such as complement or substitute goods. Unrelated good would not matter because they have a XED value of 0