This document discusses concepts of economics including cross elasticity of demand, income elasticity of demand, price elasticity of supply, and characteristics of the short run. It provides examples of calculating elasticities to determine if goods are substitutes, complements, normal goods, and whether supply is elastic or inelastic based on the responsiveness of quantity supplied to price changes. The short run is defined as a period too short for firms to change capacity or for new firms to enter the market, resulting in an inelastic supply response to price increases.
1. Economics Topic 5.1 Exercise
1. The responsiveness of demand for one good to a change in a price of another.
XED =
2. XED =
= 0.9 *they are substitute goods
3. XED =
= - 1 *they are complementary good
4. YED =
5. YED =
= 1.1 *they are Normal goods
2. 6. YED =
= -1.1
7. The responsiveness of QS to change in price
PES =
3. 8. Price Elastic Supply
Product whose supply changes greatly when the is slight price change
Price Inelastic supply
Product whose supply changes slightly when there is great price change
9. PES =
= 1.5 * Elastic
* Little change in price, big change in QS
10. - Short run refers to a time period that is too short for a firm to change their factory
capacity or for new firms to enter the market.
- Product price increase, firm can’t increase supply significantly to take advantage of
higher price
- Supple inelastic
