2.2.3—Elasticity coefficients

The sign identifies the direction of the relationship: PED is usually negative, YED is positive for normal goods and negative for inferior goods, and XED is positive for substitutes and negative for complements.

The absolute size measures responsiveness: values above one are elastic, below one inelastic and equal to one unitary. Sign and magnitude must both be reported.

XED = +0.6 suggests substitutes but a relatively weak response; YED = −1.2 suggests an inferior good with more-than-proportional fall in demand as income rises.

A coefficient of −2 is not “less elastic” than +1 because of its sign; compare absolute values for responsiveness.