Price Elasticity of Demand, Cross Price Elasticity, Income Elasticity

ELASTICITY
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Elasticity
1 Price Elasticity of Demand
Definition
Price elasticity of demand refers to the measure of responsiveness of demand in the market after the price change of a certain product. A demand of a product or service is price elastic when a change in price affects the percentage change in demand of that product. Price elasticity of demand is greater than one.
Equation
Price Elasticity of demand=percentage change in quanity demandedpercentage change in price
Example
What is the price elasticity of demand if the price of onions increased by 10% and the demand fall by 20%?
price elasticity=-2010=-2.0
2 Cross Price Elasticity
Definition
Cross elasticity of demand refers to an economic concept for measuring the responsiveness of one good in the quantity demanded when a change in price happens in another good. When the demand for one good increases in substitute goods the demand for the other product also increases. Therefore, the cross elasticity of demand for substitute goods is always positive. On the hand, the increases and decreases of compliment goods to the other good will be negative. When the coefficient is zero, it means that the goods are not related in any manner. Therefore, compliment goods have a negative coefficient; substitute goods have a positive coefficient while goods that are not related at all have a coefficient of zero CITATION Eco16 \l 1033 (Economics Help, 2016).
Cross price Elasticity =Percentage Change in Quantity ofproduct Bpercentage Change in Price of Product A
Example
In a substitute good; if the price of product B (coffee) increases in the market but every other factor remains the same, there will be an increase for product A (tea) as consumers switch to the substitute good. These coefficients will be positive.
On the other hand, in a compliment good; if every factor is at constant and the price of ...