ECO-4 Lecture Notes - Lecture 7: Marginal Utility, Marginal Cost, Reservation Price
Document Summary
Definition: percentage by which the quantity demanded of a good changes in response to a percentage change in the price of another good: e. g. quantity demanded for cars in response to 10% increase in price of petrol. Positive cross-price elasticity of demand substitutes e. g. 10% increase in price of petrol will lead to increase in bus travel. Negative cross-price elasticity of demand compliments e. g. 10% increase in price of petrol will lead to decrease in cars demanded. Percentage by which the quantity demanded of a good changes in response to a change in income: e. g. percentage by which the quantity of peanuts demanded changes in response to a 1% change in income. Positive income elasticity of demand normal good. Negative income elasticity of demand inferior good. Percentage change in quantity supplied that occurs in response to a change in price.