ECON 101 2Midtermreview

The elasticity of supply is calculated by using the

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Unformatted text preview: is: Percentage change in quantity demanded Percentage change in price of substitute or complement The cross elasticity of demand for a substitute is positive. a complement is negative. Income Elasticity of Demand • The income elasticity of demand measures how the quantity demanded of a good responds to a change in income, other things remaining the same. • The formula for calculating the income elasticity of demand is Percentage change in quantity demanded Percentage change in income • • • If the income elasticity of demand is greater than 1, demand is income elastic and the good is a normal good. If the income elasticity of demand is greater than zero but less than 1, demand is income inelastic and the good is a normal good. If the income...
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This note was uploaded on 03/29/2014 for the course ECON 101 taught by Professor Vanderwaal during the Spring '08 term at Waterloo.

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