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    (Original post by mapotts53)
    The scenario is incorrect. Supply will not fall as a result of the price rising. Whoever wrote that scenario does not understand PES.
    thank you so much!!! so, i should ignore it ?
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    (Original post by Jane122)
    thank you so much!!! so, i should ignore it ?
    Yes
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    (Original post by mapotts53)
    Yes
    one question, when interpreting the value of PES or PED do you ignore the sign in front and look at the number? e.g. so if PED was -0.8 you ignore the minus sign and then 0.8 means the good is relatively price inelastic?
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    (Original post by Jane122)
    one question, when interpreting the value of PES or PED do you ignore the sign in front and look at the number? e.g. so if PED was -0.8 you ignore the minus sign and then 0.8 means the good is relatively price inelastic?
    yes you do for PED as it is always negative since demand has a downward sloping curve, and same for PES since supply is an upward sloping curve. the only one where it matters is XED and YED.
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    (Original post by azizadil1998)
    yes you do for PED as it is always negative since demand has a downward sloping curve, and same for PES since supply is an upward sloping curve. the only one where it matters is XED and YED.
    so for XED and YED you MUST pay attention to if it's neg or pos ?
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    (Original post by Jane122)
    so for XED and YED you MUST pay attention to if it's neg or pos ?
    Yeah thats correct because +ve XED indicates it is a substitute good whereas a -ve XED shows that they are complementary goods, and for YED a +ve is luxury and -ve is inferior.
 
 
 
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