Here are the answers to your questions: 1. Differentiate between 'cross elasticity of demand' and 'income elasticity of demand'. Cross elasticity of demand (XED)* measures the responsiveness of the quantity demanded of one good to a change in the price of another good. It indicates whether goods are substitutes (positive XED) or complements (negative XED). Income elasticity of demand (YED)* measures the responsiveness of the quantity demanded of a good to a change in consumers' income. It indicates whether a good is normal (positive YED) or inferior (negative YED). 2. Discuss the FIVE types of elasticity of demand. Perfectly elastic demand*: Quantity demanded changes infinitely with a tiny change in price. The demand curve is horizontal. Relatively elastic demand*: The percentage change in quantity demanded is greater than the percentage change in price ($E_d > 1$). Consumers are very responsive to price changes. Unitary elastic demand*: The percentage change in quantity demanded is equal to the percentage change in price ($E_d = 1$). Total revenue remains constant with price changes. Relatively inelastic demand*: The percentage change in quantity demanded is less than the percentage change in price ($E_d < 1$). Consumers are not very responsive to price changes. Perfectly inelastic demand*: Quantity demanded does not change at all, regardless of the change in price ($E_d = 0$). The demand curve is vertical. 3. List any SIX factors which determine the elasticity of demand. Availability of close substitutes Whether the good is a necessity or a luxury The proportion of income spent on the good The time horizon considered The definition of the market The addictiveness or habit-forming nature of the good 4. In a tabular form, indicate any TWO differences between 'macro-economics' and 'micro-economics'. | Feature | Macroeconomics | Microeconomics | | :--------------- | :------------------------------------------------- | :------------------------------------------------ | | Scope | Studies the economy as a whole (aggregate level). | Studies individual economic units (firms, households). | | Key Concerns | Deals with national income, inflation, unemployment. | Deals with individual prices, output, consumer behavior. | 5. Explain the term 'opportunity cost'. Opportunity cost* is the value of the next best alternative that must be foregone when a choice is made. It represents what is given up in order to obtain something else.