An individual spends all his income on three goods. He buys 550 units of X at $1 per unit, 425 units of Y at $2 per unit and 200 units of Z at $ 3 per unit. The price of X increases by 10%, but there is no change in prices of Y and Z. He now buys 440 units of Y and 190 units of Z. Calculate his price elasticity of demand for X.

Q: What is the cross price elasticity ? How do we prove these goods are substitutes for question part b

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Elasticity of Demand and Supply

The elasticity of demand and supply are two important concepts of microeconomics. The elasticity of demand measures the responsiveness of consumers’ demands to the price change, changes in income of consumers, and changes in the price of the related goods. Similarly, the elasticity of supply refers to the proportionate change in the quantity supplied due to the proportionate change in the price. In other words, it can be said that elasticity of supply measures how the quantity of supply changes when the price changes of that particular product.