Price, income and cross-elasticities of demand

1) The concepts of ‘price’, ‘income’ and ‘cross-elasticities of demand’.

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2) How to use formulae to calculate price, income and cross-elasticities of demand.

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3) Interpretation of numerical values of price elasticity of demand:

• perfectly price elastic demand • price elastic demand

• unitary price elastic demand

• perfectly price inelastic demand. • price inelastic demand

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4) The factors influencing price elasticity of demand:

• availability of substitutes  • branding

• percentage of total expenditure

• addictiveness of product • durability of product.

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5) How to calculate total revenue.

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6) How price elasticity of demand varies along a straight line demand curve.:

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7) The relationship between price elasticity of demand and total revenue.

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8) Interpretation of numerical values of income elasticity of demand:

• perfectly income elastic demand • income elastic demand

• perfectly income inelastic demand • income inelastic demand

• the distinction between normal goods and inferior goods.

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9) Interpretation of numerical values of cross elasticity of demand. Significance for the degree to which goods are:

• substitutes • complements • unrelated.

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10) The significance of price, income and cross-elasticity for firms, consumers and the government.