If the demand is elastic it means that the total percentage change in the demand is more than the percentage change in the price. This will result a value which is more than 1. Furthermore, if the opposite happens with a result lower than 1, it means that the price is inelastic.
The following table also shows the elasticity values with the examples given next to each item.
n = 0
No real example. This is an utopic situation. But fundamentals such as bread and water can be very near to here.
0 < n < 1
n = 1
1 < n < ∞
Luxury goods, restaurant prices etc.
n = ∞
No real example, but very luxury goods such as private airplanes are near to here.
For example, if, in response to a 10% increase in the price of fuel, the quantity of new cars that are fuel inefficient demanded decreased by 20%, the cross elasticity of demand would be -20%/10% = -2.
Income elasticity of demand is a measure of the change in the demand of a good when there is a change in the income of the consumers. The formula is depicted in the following:
Most of the goods will be demanded more when there is an increase in the income. Nevertheless, there are some goods which are called inferior goods which have negative income elasticities. Inexpensive foods like bologna, hamburger, mass-market beer, frozen dinners, and canned goods are additional examples of inferior goods. As incomes rise, one tends to purchase more expensive, appealing and nutritious foods. Therefore, the foreign travels are quite income elastic. As the income of the people increases, they tend to demand more foreign country travels.