Elasticity: A Measure of Response

Read this chapter to learn about the concept of elasticity. Be sure to read Sections 5.1-5.4 following the introduction.

Responsiveness of Demand to Other Factors

Answer To Try It Problem

Using the formula for cross price elasticity of demand, we find that e_AB = (−3%)/(10%) = −0.3. Since the e_AB is negative, bagels and cream cheese are complements. Using the formula for income elasticity of demand, we find that e_Y = (+1%)/(10%) = +0.1. Since e_Y is positive, bagels are a normal good.