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  • There is still have income elasticity right? and what is it and how to calculate?
  • *PS negative sign (-)  is included in ans
  • Ey=
  • Yeap! Income elasticity of demand (Ey)= measures the degree of responsiveness of quantity demanded to changes in income
  • %Δ  Q%Δ  y
  • The formula is
  • Or
  • Q2 -Q1(Q2 + Q1) ÷ 2
  • y2 -y1(y2 + y1) ÷ 2
  • Is that all for income elasticity?
  • Negative Ey y↑, Q ↓(inferior goods)Postive Eyy↑,Q↑
  • Elastic= Ey > 1= %Δ  Q > %Δ  y(normal goods)
  • Nope, we need to know how to differentiate it. So it split into
  • Inelastic=Ey < 1= %Δ  Q < %Δ  y(essential goods)
  • So how about cross elasticity of demand?
  • The formula is 
  • *PS negative sign (-)  is included in ans
  • Ex=
  • Cross elasticity of demand (Ex)= measures the degree of responsiveness of quantity demanded of a good
  • %Δ  Q%Δ  y
  • Or
  • Q2 -Q1(Q2 + Q1) ÷ 2
  • P2 -P1(P2 + P1) ÷ 2
  • How we differentiate it?
  • Elastic (strong)= Ey > 1= %Δ  Q > %Δ  P
  • This will be more easier.Negative ExP↑, Q ↓(complementary goods)
  • Positive ExP↑, Q ↑(substitutes goods)
  • Inelastic (weak)= Ey < 1= %Δ Q < %Δ P
  • What is the law of supply?
  • It is the quantity which producersare willing and able to offer on the market at any given price over a givenperiod of time, ceteris paribus.
  • What is the factors of supply?
  • The factors of supply are-Production costs-Technological advancement-Prices of alternative goods-Joint products- External conditions- Number of suppliers-Government influences
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