AP Microeconomics / Unit 2: Supply and Demand
2.5 Other Elasticities
Notes
- Cross-price elasticity: positive → substitutes; negative → complements.
- Income elasticity: positive → normal good (above 1 = luxury); negative → inferior good.
Practice
Cross-price elasticity is −0.8. The goods are:
Negative.
Income elasticity is −0.3. The good is:
Demand falls as income rises.
Income elasticity of 2.0 suggests the good is:
Greater than 1.
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