ECON 101 2Midtermreview

The formula for calculating the cross elasticity is

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Unformatted text preview: y of demand by observing the change in total revenue that results from a price change (when all other influences on the quantity sold remain the same). If a price cut increases total revenue, demand is elastic. If a price cut decreases total revenue, demand is inelastic. If a price cut leaves total revenue unchanged, demand is unit elastic. The Factors That Influence the Elasticity of Demand The elasticity of demand for a good depends on: The closeness of substitutes The proportion of income spent on the good The time elapsed since a price change Cross Elasticity of Demand • The cross elasticity of demand is a measure of the responsiveness of demand for a good to a change in the price of a substitute or a complement, other things remaining the same. • The formula for calculating the cross elasticity...
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