The Total Revenue Test of Price Elasticity of Demand

By looking at how a change in price affects the total revenues of producers in a market (whether TR increases or decreases) we can draw some quick and accurate conclusions about whether demand for a good is elastic, inelastic or unit elastic between two prices. We’ll also learn that even along a straight-line demand curve there is a RANGE of elasticities of demand for every good.

 

Part 1

Part 2

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Cross Price Elasticity of Demand (XED) and its Determinants

This lesson introduces the concept of cross price elasticity of demand, or the responsiveness of consumers of one good to a change in the price of a related good. We’ll outline the formula, walk through a couple of examples, interpret the results and discuss what factors determine the cross price elasticity of demand between two goods.

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Income Elasticity of Demand

Our final lesson on elasticities will examine the responsiveness of consumers of a good to a change in their own incomes. The lesson introduces the formula for YED, gives an example of how to calculate YED for both a normal good and an inferior good and explains the different possible values of the YED coefficient.

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