ENDURING UNDERSTANDING

MKT-3
Individuals and firms respond to incentives and face constraints.

LEARNING OBJECTIVE ESSENTIAL KNOWLEDGE
  • MKT-3.E
    a. Define measures of elasticity.
    b. Explain (using graphs where appropriate) measures of elasticity and the impact of a given price change on total revenue or total expenditure.
    c. Calculate (using data from a graph or a table as appropriate) measures of elasticity.
ESSENTIAL KNOWLEDGE
  • MKT-3.E.9
    Elasticity can be measured for any determinant of demand or supply, not just the price.
  • MKT-3.E.10
    Income elasticity of demand is measured by the percentage change in the quantity demanded divided by the percentage change in consumers’ income. Economists use the income elasticity of demand to determine whether a good is normal or inferior.
  • MKT-3.E.11
    Cross-price elasticity of demand is measured by the percentage change in the quantity demanded of one good divided by the percentage change in the price of another good. Economists use the cross-price elasticity of demand to determine whether goods are substitutes, complements, or not related.