pumbting
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Hey does anyone have any good ways to remember the elasticities, or can help me fully understand them? So price, income and cross elasticity of demand, and price elasticity of supply.

I'm retaking Econ 1 on Monday and I always get the questions wrong, and they come up in every single paper Thanks!
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username2460773
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Understanding and memorising is the best way.
However, you can just work it out on the fly using logic and the data
For example:
PED, -20% change in price but only +10% D means inelastic as D less than responsive to change in price. calculate it and sure enough its less than 1 (0.5)
PES, same as above but with S
YED, income raises and demand falls? inferior. Income raises and so does demand? normal or luxury(more elastic).
XED, price falls for one product and demand for the other rises, compliments(visa-versa for substitutes)
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pumbting
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(Original post by Aydin7)
Understanding and memorising is the best way.
However, you can just work it out on the fly using logic and the data
For example:
PED, -20% change in price but only +10% D means inelastic as D less than responsive to change in price. calculate it and sure enough its less than 1 (0.5)
PES, same as above but with S
YED, income raises and demand falls? inferior. Income raises and so does demand? normal or luxury(more elastic).
XED, price falls for one product and demand for the other rises, compliments(visa-versa for substitutes)
Ah lifesaver, thaaaanks!
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pumbting
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(Original post by AnIndianGuy)
Just rewrite each one over and over again. GOGOGO
Thanks!
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The Financier
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(Original post by pumbting)
Hey does anyone have any good ways to remember the elasticities, or can help me fully understand them? So price, income and cross elasticity of demand, and price elasticity of supply.

I'm retaking Econ 1 on Monday and I always get the questions wrong, and they come up in every single paper Thanks!
It's always calculated by dividing the percentage change in Quantity over the variable you're measuring because we're looking at the responsiveness of quantity (i.e. how it changes) when another variable changes. So:

PED = % change in Qd/% change in P
YED = % change in Qd/% change in Y
XED = % change in Qd of good a/% change in P of good b
PES = % change in Qs/% change in P

Our Econ teacher always used "Queen over Philip" (in the monarchy ) as a way of remembering for the price elasticities. You just need to change the letter at the bottom for income and cross.

As for the values you get:

For PED,
PED = 0 means it's perfectly inelastic - demand does not change at all when the price changes
0 < PED < 1 means its inelastic - demand changes by less than the change in price
PED=1 means its unit elastic - demand changes by the same level as the change in price
PED > 1 means its elastic - demand changes by more than the change in price
PED = ∞ means its perfectly elastic - demand changes by an infinite amount from the change in price

For YED,
A good with a positive YED is a normal good whose demand increases when consumers have an increase in income. We can classify them further:
0 < YED <1 means its a necessity - demand changes by less than the change in income
YED > 1 means its a luxury good - demand changes by more than the change in income

A good with a negative YED is an inferior good whose demand falls when consumers have less income. Typically these are goods where superior alternatives are available (e.g. supermarket brand food)

For XED,
XED > 0 means they're substitutes - a fall in price on one good causes a fall in quantity demanded for the other
XED < 0 means they're complements - a fall in price of one good causes a rise in demand for the other

Hope that helps
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Pato1
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https://www.youtube.com/watch?v=difGsq0aD8E
Fantastic teacher
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pumbting
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(Original post by The Financier)
It's always calculated by dividing the percentage change in Quantity over the variable you're measuring because we're looking at the responsiveness of quantity (i.e. how it changes) when another variable changes. So:

PED = % change in Qd/% change in P
YED = % change in Qd/% change in Y
XED = % change in Qd of good a/% change in P of good b
PES = % change in Qs/% change in P

Our Econ teacher always used "Queen over Philip" (in the monarchy ) as a way of remembering for the price elasticities. You just need to change the letter at the bottom for income and cross.

As for the values you get:

For PED,
PED = 0 means it's perfectly inelastic - demand does not change at all when the price changes
0 < PED < 1 means its inelastic - demand changes by less than the change in price
PED=1 means its unit elastic - demand changes by the same level as the change in price
PED > 1 means its elastic - demand changes by more than the change in price
PED = ∞ means its perfectly elastic - demand changes by an infinite amount from the change in price

For YED,
A good with a positive YED is a normal good whose demand increases when consumers have an increase in income. We can classify them further:
0 < YED <1 means its a necessity - demand changes by less than the change in income
YED > 1 means its a luxury good - demand changes by more than the change in income

A good with a negative YED is an inferior good whose demand falls when consumers have less income. Typically these are goods where superior alternatives are available (e.g. supermarket brand food)

For XED,
XED > 0 means they're substitutes - a fall in price on one good causes a fall in quantity demanded for the other
XED < 0 means they're complements - a fall in price of one good causes a rise in demand for the other

Hope that helps
Ah thank you so much that's so helpful!!
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pumbting
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ooh never seen him before, so thanks that's great
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mapotts53
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If you are in to football at all you will know the team QPR. This is a good way of remembering that in the equation Q comes before (on top of) PR.
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