Explain what elasticity measures and distinguish price, income, and cross-price elasticity of demand.

### The concept Elasticity compares percentage changes, so it describes responsiveness rather than a change measured only in units. Price elasticity asks how quantity demanded responds to the good’s own price. Income elasticity asks how demand responds to income. Cross-price elasticity asks how demand for one good responds to a different good’s price. The sign of cross-price elasticity helps identify the relationship: positive values are associated with substitutes, while negative values are associated with complements. ### What a good answer covers - State that elasticity compares percentage changes. - Distinguish the variable paired with quantity demanded in each measure. - Interpret the signs of cross-price elasticity. - Explain that the measures answer different responsiveness questions. ### Terms - **Elasticity**: a measure of responsiveness based on percentage changes. - **Complement**: a good commonly consumed or used with another good. ### Remember Identify which second variable changes to tell the elasticity measures apart.