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SingaporeEconomics

Elasticity and Its Applications

5 dot points across 5 inquiry questions. Click any dot point for a focused answer with worked past exam questions where available.

How do elasticities decide who really pays a tax and how policy bites?

Apply elasticity concepts to the incidence of taxes and subsidies and to firm and government decisions
A focused answer to the H2 Economics learning outcome on applying elasticity. How PED and PES split the incidence of a tax or subsidy, and how elasticities shape pricing, taxation and policy decisions.
9 min answer →

Why does cutting a price sometimes raise revenue and sometimes lower it?

Explain the relationship between price elasticity of demand and total revenue, and apply it to pricing decisions
A focused answer to the H2 Economics learning outcome on PED and total revenue. Why a price change moves revenue differently for elastic and inelastic goods, and how firms use this to set prices.
8 min answer →

How does demand respond to changes in income and to the prices of other goods?

Define and calculate income and cross elasticity of demand, and use their signs to classify goods
A focused answer to the H2 Economics learning outcome on income and cross elasticity. The formulae and calculations for YED and XED, and how their signs distinguish normal, inferior, substitute and complement goods.
8 min answer →

How responsive is quantity demanded to a change in price, and what decides it?

Define and calculate price elasticity of demand, interpret its value, and explain its determinants
A focused answer to the H2 Economics learning outcome on price elasticity of demand. The formula and how to calculate PED, how to interpret elastic and inelastic values, and the determinants that make demand responsive.
9 min answer →

How responsive is quantity supplied to a change in price, and what limits that response?

Define and calculate price elasticity of supply, interpret its value, and explain its determinants
A focused answer to the H2 Economics learning outcome on price elasticity of supply. The formula and calculation of PES, how to interpret elastic and inelastic supply, and the determinants including time and spare capacity.
8 min answer →