KRUGMAN'S MICROECONOMICS for AP* Other Elasticities Margaret Ray and David Anderson Micro: Econ: 12 48 Module.

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KRUGMAN'S MICROECONOMICS for AP* Other Elasticities Margaret Ray and David Anderson Micro: Econ: Module

What you will learn in this Module : How cross-price elasticity of demand measures the responsiveness of demand for one good to changes in the price of another good. The meaning and importance of the income elasticity of demand, a measure of the responsiveness of demand to changes in income. The significance of the price elasticity of supply, which measures the responsiveness of the quantity supplied to changes in price. The factors that influence the size of these various elasticities.

Other Elasticities Cross-price elasticity of demand Income elasticity of demand Price elasticity of supply

Cross-Price Elasticity of Demand Measures the responsiveness of the demand for good “X” to changes in the price of good “Y” Exy = % ∆ Qd of X / %∆ P of Y Substitutes (positive) Complements (negative

Income Elasticity of Demand Measures the responsiveness of demand for a good to changes in income. Ei = % ∆ Qd / %∆ I Normal good (positive) Inferior good (negative)

Price Elasticity of Supply Measures the responsiveness of quantity supplied to changes in price. Es = % ∆ Qs / %∆ P If E s >1, supply is considered elastic. If E s < 1, supply is considered inelastic. If E s = 1, supply is considered unit elastic.

Factors Influencing Price Elasticity of Supply Determinants of Price Elasticity of Supply Availability of inputs Time