1.1.4 Elasticity Price elasticity of demand (PED) a) Definition of PED. b) Formula of PED. c) Calculate the PED using given percentage changes in quantity demanded and percentage changes in price. d) The use of diagrams to show price elastic and price inelastic demand. e) Interpret numerical values of PED that show: • perfect price inelasticity • price inelasticity • unitary price elasticity • price elasticity • perfect price elasticity. f) The factors influencing PED, including: • substitutes • degree of necessity • percentage of income spent on goods or service • time. g) Use of total revenue calculations to show the relationship between a change in price and the change in total revenue, to determine whether demand is price elastic or price inelastic. Price elasticity of supply (PES) h) Definition of PES. i) Formula of PES. j) Calculate the PES using given percentage changes in quantity supplied and percentage changes in price. k) The use of diagrams to show price elastic and price inelastic supply. l) Interpret numerical values of PES that show: • perfect price inelasticity • price inelasticity • unitary price elasticity • price elasticity • perfect price elasticity.

​m) The factors influencing PES, including: • factors of production • availability of stocks • spare capacity • time. n) Use examples to show the likely PES for manufactured and primary products. Income elasticity of demand o) Definition of income elasticity of demand. p) Formula of income elasticity of demand. q) Calculate the income elasticity of demand using given percentage changes in quantity demanded and percentage changes in income. r) Interpret numerical values of income elasticity of demand that show: • luxury goods • normal goods • inferior goods. s) The significance of price and income elasticities of demand to businesses and the government, in terms of: • the imposition of indirect taxes and subsidies • changes in income