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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?

A

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

B

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

C

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

D

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

Markscheme

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

119 exam-style questions on Edexcel A A Level Economics 1.2.3 Price, income and cross elasticities of demand. Each one has a worked solution and a mark scheme showing where the marks go.

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