IED and XEDIED and XED

• Must know the formulae for income Must know the formulae for income elasticity of demandelasticity of demand and cross and cross price price elasticity of demandelasticity of demand

• Should understand what the different Should understand what the different values meanvalues mean

• Could be able to link IED and XED to Could be able to link IED and XED to specific examplesspecific examples

IEDIED

% Change in Quantity % Change in Quantity DemandedDemanded

% Change in Income% Change in Income IEDIED

+40 20

-10 20

+200 +20

Comparing PED and IEDComparing PED and IED

• Explain the PED values.Explain the PED values.• Explain the IED values.Explain the IED values.• Is there a relationship?Is there a relationship?

XEDXED

% Change in Quantity % Change in Quantity Demanded Good ADemanded Good A

% Change in Price % Change in Price Good BGood B

XEDXED

-20 -10

+20 -10

0 +20