Economics · Unit 2: Microeconomics

EC2.5 — Elasticities of demand

Economics · SL / HL · syllabus-mapped notes

1. EC2.5.1

   Concept of elasticity

   Define elasticity as responsiveness, and explain why it is always measured in percentages.

2. EC2.5.2

   Price elasticity of demand (PED)

   Calculate PED and interpret its value, explain what determines it, and evaluate what it means for a firm’s revenue and a government’s tax take.

3. EC2.5.3

   Income elasticity of demand (YED)

   Calculate YED, use its sign to tell normal from inferior goods and its value to tell necessities from luxuries, and evaluate what it implies for firms and for the structure of an economy.