2009•SSRN Electronic JournalOpen access

Cross-Price Elasticity and Income Elasticity of Demand: Are Your Students Confused?

Philip E. Graves, Robert L. Sexton

Abstract

The authors demonstrate that most textbooks are ambiguous at best in their treatment of cross-price and income elasticity of demand. There is also no discussion of what initiates a price increase in discussions of substitutes and complements in the textbooks examined. The authors offer a remedy for these deficiencies.

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Key concepts: Price elasticity of demand, Economics, Elasticity (physics), Wealth elasticity of demand, Income elasticity of demand, Cross elasticity of demand, Price elasticity of supply, Microeconomics