question archive What are some examples from where we can prove the price, income and cross elasticity of demand?

What are some examples from where we can prove the price, income and cross elasticity of demand?

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What are some examples from where we can prove the price, income and cross elasticity of demand?

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In economics, the price elasticity of demand of a certain product measures the responsiveness of the quantity demanded in response to any alteration in the price level of that product in the market. The income elasticity of demand for a certain product measures the responsiveness of the quantity demanded in response to any alteration in the income level of that product in the market. The cross-price elasticity of demand is a concept which measures the responsiveness of the quantity demanded In response to any alteration in the price levels of some other product in the market.

Suppose there are two products automobile and gasoline. Assuming that both are normal goods the quantity demanded of each product is inversely related to the price level of their respective products. Also, it can be stated that the demand for both products is positively related to the income level of the consumer. Now as both the products can be regarded as complementary products, there will be an inverse relationship between the demand level and the price level of the Other product in the market i.e. When there is an increase in the price level of gasoline then there will be a fall in the demand level for automobile as well and vice versa.