What you'll learn
How responsive demand and supply are to changes.
Key ideas
- Price elasticity of demand (PED): elastic (responsive) vs inelastic (unresponsive).
- Necessities are usually inelastic; luxuries are usually elastic.
- Income elasticity and price elasticity of supply.
Exam tips
- Link elasticity to substitutes and necessity.
- Explain the effect on total revenue.
Common mistakes
- Confusing elastic and inelastic.
- Mixing up price and income elasticity.