Practise calculating and interpreting PED, YED and XED and applying their signs and magnitudes to classify goods, predict revenue and support pricing, product or tax decisions.
What can be measured by cross-elasticity of demand?
a change in real income as a result of a change in the price of consumer goods
a change in the demand for a good in response to a change in the price of a complement
a change in the price of a good in response to a change in the demand for a substitute
a change in the price of a good when the demand for it changes
B
Which statement is correct?
Demand for an inferior good has a positive relationship to income and a negative relationship to price.
Demand for an inferior good has a negative relationship to income and a negative relationship to price.
Demand for a normal good has a positive relationship to income and a positive relationship to price.
Demand for a normal good has a negative relationship to income and a positive relationship to price.
B
When the supply of a good decreases, equilibrium price stays the same.
What is the price elasticity of demand of the good?
-1
zero
+1
infinite
D