Answer to Question #304958 in Economics of Enterprise for esha

Question

Price elasticity of demand measures the responsiveness of the quantity demanded to a change in price when all other influences on buyers’ plans remain the same. Explain the different types of elasticity of demand.

Answer 1

The different types of elasticity of demand include:

Price elasticity of demand - this is the measure of responsiveness of the quantity demanded of a product to a change in price, with all other factors affecting demand remaining constant.

Income elasticity of demand - this is the measure of responsiveness of the quantity demanded of a good to a change in the buyer's real income.

Cross elasticity of demand - this is a measure of the sensitiveness of the quantity demanded of one good when there is a change in the price of another good. The result obtained will be positive for a substitute and negative for a complementary good.