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Lecture Comments (18)

1 answer

Last reply by: Professor Jibin Park
Sat Sep 10, 2016 1:02 AM

Post by Jella Lu on September 10 at 12:58:52 AM

17:30:
Is the definition of income elasticity of demand actually the cross-price elasticity of demand?

1 answer

Last reply by: Professor Jibin Park
Tue Nov 10, 2015 7:14 PM

Post by Gautham Padmakumar on November 10, 2015

17:44,
Income elastic.
Did you mix up Q1 and P1 ?
the entire answer would be different. I saw it work out to 2.5
because it would be Q1 - Q2 / Q1 not (Q2 - Q1/ Q2)

1 answer

Last reply by: Professor Jibin Park
Wed Oct 22, 2014 6:05 PM

Post by Rebecca Dai on October 22, 2014

And according to what you said in the last example, the situation for pizza is exactly inelastic.

2 answers

Last reply by: Professor Jibin Park
Wed Oct 22, 2014 6:21 PM

Post by Rebecca Dai on October 22, 2014

For pizza, if the price does not change when quantity changes a lot, how come it is elastic?

1 answer

Last reply by: Professor Jibin Park
Wed Oct 22, 2014 5:46 PM

Post by Rebecca Dai on October 22, 2014

In formula for income elasticity of demand part, shouldn't the formula be (Q1-Q2)/Q1 (absolute value) rather than (Q2-Q1)/Q2 (that's what you did when you were calculating). Thanks

1 answer

Last reply by: Professor Jibin Park
Wed Oct 22, 2014 5:39 PM

Post by Rebecca Dai on October 22, 2014

I think it is really farfetched to say that boots and skis are complements? Could you give me an example of complements in real life that are really complements? Thanks

1 answer

Last reply by: Professor Jibin Park
Wed Apr 2, 2014 10:42 PM

Post by Elva Fu on April 2, 2014

In the slide of cross-price elasticity of demand, the formula and the description do not match. (A and B are swapped)

0 answers

Post by Professor Jibin Park on January 24, 2014

You are absolutely right! It should have been the other way around even though the result is the same.

1 answer

Last reply by: Professor Jibin Park
Fri Jan 24, 2014 4:28 PM

Post by Jessie Xiao on January 24, 2014

on example 2, shouldn't %â–³Qb= -25%
and %â–³Pa= +20%  even though the result is the same?

Income, Cross-Price & Supply Elasticities

  • Cross-price elasticity measures the responsiveness of demand for one good to changes in the price of another good.
  • For substitutes, the coefficient will be positive.
  • For complements, the coefficient will be negative.
  • Income elasticity of demand measures how much quantity demanded changes with income
  • For normal goods, the coefficient is positive.
  • For inferior goods, the coefficient is negative.
  • Elasticity of supply measures how suppliers will react to a change in price.
  • If e > 1, supply is elastic.
  • If e < 1, supply is inelastic.

Income, Cross-Price & Supply Elasticities

Lecture Slides are screen-captured images of important points in the lecture. Students can download and print out these lecture slide images to do practice problems as well as take notes while watching the lecture.

  • Intro 0:00
  • Lesson Overview 0:16
  • II. Product Markets 1:31
  • What is Cross-Price Elasticity of Demand? 2:57
    • Definition of Cross-Price Elasticity of Demand
    • Formula
  • Substitutes 6:24
    • Definition of Substitutes
    • Items Match as Substitutes
    • If the Price of Good A Increases, then the Quantity Demanded of Good Will Increase
    • If the Price of Good A Decreases, then the Quantity Demanded of Good Will Decrease
  • Example 1 8:34
  • Complements 9:35
    • Definition of Complements
    • Items Match as Complements
    • If the Price of Good A Decreases, then the Quantity Demanded of Good Will Increase
    • If the Price of Good A Increases, then the Quantity Demanded of Good Will Decrease
  • Example 2 12:38
    • Definition of Income Elasticity of Demand
    • Normal Good
    • Inferior Good
    • Income-Elastic
    • Income-Inelastic
  • Formula for Income Elasticity of Demand 17:20
    • Formula
  • Example 3 21:39
  • Example 4 24:52
  • Price Elasticity of Supply 27:59
    • Definition of Price Elasticity of Supply
    • Formula
    • Availability of Inputs Affects Elasticity
  • Two Extreme Cases of Supply Price Elasticity 29:35
  • Example 5 32:41