Page 5 - FINAL CFA SLIDES DECEMBER 2018 DAY 5
P. 5
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. 5
Where:
• Income and car price
are measured in 000’s;
• The price of bus travel is
measured in average $
Y = a – bx/P = a -bQ
per 100 miles travelled.
Average Automobile Price (P auto) = $22,000 Income (I) = $40,000
Price of Bus Travel (P BT) = $25 Price of gasoline (Pgas) = $3
Calculate and interpret the income elasticity of gasoline demand and the cross price
elasticity of gasoline demand with respect to the price of bus travel.
