Here is a bit of review:

All price elasticities of demand from the previous lesson are negative numbers.

When the negative number is a decimal (having a value between zero and -1,
-  demand is said to be inelastic, and
-  the entrepreneur will do well to restrict production of the good.
The lesser quantities will result in more than offsetting higher prices. 
Total revenue (the product of prices and quantities) will rise when this strategy is followed.

When the negative number is a value greater than 1,
-  demand is said to be elastic, and
-  the entrepreneur will do will to lower the price of his or her good or service. 
The lower prices will more than be compensated for by increased quantities of the good or service being demanded by the consuming public. 
Consequently, total revenues will rsie when this strategy is successfully followed.

When the negative number is exactly minus one (-1),
-  demand is said to be of unitary elasticity, and
-  the entrepreneur should change neither the price nor the quantity.  
-  Total revenue is already at a maximum. 
Disturbances in price or quantity will only lesson the total revenue received by the business.

 5.3  Define and explain the factors that influence the cross elasticity of demand and the income elasticity of demand.

 5.3  Define and explain the factors that influence the cross elasticity of demand and the income elasticity of demand.

A.  Cross-price elasticity of demand shows how the demand for a good changes when the price of one of its substitutes or complements changes.

B.  Cross elasticity is positive for substitutes and negative for complements.

C.  Income elasticity of demand shows how the demand for a good changes when income changes. 
- For a normal good, the income elasticity of demand is positive. 
- For an inferior good, the income elasticity of de3mand is negative.

Take the optional post-study bonus point quizzes on Elasticities of Demand and Supply on Saturday following Module 1.

Take the optional pre-study bonus point quizzes on Efficiency and Fairness of Markets on Sunday preceding Module 2.

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