DEMAND ELASTICITIES

DEMAND  ELASTICITIES

Other than price elasticity of demand there are other elasticity's to describe the behavior of buyers in a market. They are:

1) Income elasticity of demand

2) Cross-price elasticity of demand

1) INCOME ELASTICITY OF DEMAND   

    Income elasticity of demand is defined as the percentage change in quantity demanded divided by percentage change in income. The income elasticity of demand measures how the quantity demanded changes as consumer income changes.

Income elasticity of demand = percentage change in quantity demanded/percentage change in income

2) CROSS-PRICE ELASTICITY OF DEMAND

     Cross-price elasticity of demand is defined as percentage change in quantity demanded of good  1 divided by percentage change in the price of good 2.The cost-price elasticity of demand measures how the quantity demanded of 1 good responds to a change in the price of another good.

Cross-price elasticity of demand= percentage change in quantity demanded of good 1/percentage change in the price of good 2.