Page 4 - FINAL CFA SLIDES DECEMBER 2018 DAY 5
P. 4
Session Unit 4:
14. Topics in Demand & Supply Analysis, p. 1
LOS 14.a: Calculate and interpret price, income, and cross-price elasticities of demand
and describe factors that affect each measure., p. 4
Income Elasticity of Demand, p.4
The sensitivity of quantity demanded to a change in income. + for Normal goods –home/car?
– for inferior goods – Car type?
Cross Price Elasticity of Demand
Ratio of change in the QTY to change in the + = substitutes goods –fish / meat!
price of a related good! – = complementary goods – Car vs fuel!
p.5
At P =$3,
Qo = 138,500 – 12,500(3) = 101,000.
Y = a – bx/P = a -bQ
Is ED elastic or inelastic? Why?
