Elasticity...PED, yED, XED, PES oh my!

The demand for g/s is NOT static nor uniform!  For some products, like medication, when the price increases, the quantity demanded will not fall dramatically.  However, if the price for a trip to Tahiti increases, quantity demanded plummets.  Why?  The answer is that g/s have different price, cross and income elasticities of demand.

Price elasticity of demand (PED) is the measure of responsiveness of the quantity demanded for a g/s as a result of change in price of the same g/s.

PED = %∆Qd/%∆p

PED = 0 : perfectly inelastic

PED < 1 : inelastic (i.e. insulin) 
PED = 1 : unit elastic 
PED > 1 : elastic (i.e. restaurant dinners)

PED = ∞ : perfectly elastic

Income elasticity of demand (yED) is the measure of the responsiveness of the quantity demanded of a g/s as a result of a change in the income of the consumers demanding the good.

yED = %∆Qd/%∆y

yED > O : normal good (i.e. shirts, cars, haircuts)

yED < 0 : inferior good (i.e. poor cut of meat, public transportation)
0 < yED < 1 : necessity good (still normal) 
yED > 1 : superior good (still normal)

Cross elasticity of demand (XED) measures the responsiveness of the quantity demanded of one g/s as a result of the change to the price of another g/s. XED = %∆Qda/%∆pb

XED > O : substitutes (i.e. Pepsi and Coke)

XED < 0 : complements (i.e. mp3s and mp3 players)

Price elasticity of supply (PES) measures the responsiveness of the quantity supplied of g/s as a result of a change in price of product.

PES = %∆Qs/%∆p

PES < 1 : inelastic (harder to supply more quickly) 
PES > 1 : elastic (easier to supply more quickly)