Price elasticities of demand and supply, income and cross elasticities of demand

H2 Economics - syllabus 9570, 2026

Original teaching notes

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Learn how buyers and sellers respond to price changes and what this means for revenue. Calculate PED and PES, then use the estimates to assess pricing decisions. H2 also covers income and cross elasticity.

• What elasticity measures

  Compare percentage responses, not just the size of a change.

• Calculate and interpret PED

  Keep the sign, then classify the magnitude.

• Explain differences in PED

  Explain what makes switching or reducing consumption easier.

• Relate PED to expenditure and revenue

  A higher price can be outweighed by fewer sales.

• Distinguish slope from elasticity

  A curve's angle is not its elasticity.

• Calculate and interpret PES

  Measure sellers' quantity response to their own price.

• Explain differences in PES

  Ask what can be changed within the time available.

• Compare market adjustments

  Hold the shift fixed when comparing responsiveness.

• Use elasticity estimates carefully

  An estimate informs a decision; it does not settle every objective.

• Income elasticity of demand

  Use the sign to identify the income-demand relationship.

• Cross elasticity of demand

  Name both goods and keep their roles distinct.

• From demand estimates to market outcomes

  A demand shift is not the final quantity sold.