Question

explain the elasticity measures: own price elasticity, cross-price elasticity, and income elasticity, and how managers use each measure.

Answer 1

The own price elasticity of demand is the percentage change in the quantity demanded of a good or service divided by the percentage change in the price.

The cross-elasticity of demand is defined as the proportionate change in the quantity demanded of x resulting from a proportionate change in the price of y.

Income elasticity of demand refers to the sensitivity of the quantity demanded for a certain good to a change in real income of consumers who buy this good, keeping all other things constant