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1.2.3 Price, income and cross elasticities of demand

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Question 42

A market research consultancy estimates the following elasticity values for a premium electric vehicle (EV) brand:

  • Price elasticity of demand (PEDPEDPED) = -1.8
  • Income elasticity of demand (YEDYEDYED) = +2.4
  • Cross-price elasticity of demand (XEDXEDXED) with respect to the tariff price of residential electricity = -0.65

Based on these estimates, which of the following statements is correct?

The demand for the EV brand is price inelastic, and the EV brand is an inferior good.

The EV brand is a luxury good, and EVs and residential electricity are complements.

The demand for the EV brand is price elastic, and EVs and residential electricity are substitutes.

The EV brand is an inferior good, and EVs and residential electricity are complements.

1.2.3 Price, income and cross elasticities of demand Questions

  1. A Level
  2. /Economics
  3. /1.2.3 Price, income and cross elasticities of demand