Understanding the reasons behind these trends and variations is crucial for predicting the success of a policy aimed at reducing emissions by adjusting the price of carbon.2 1 The elasticities presented in this paper are for the short-run. [...] The term refers to the change in the quantity demanded of a particular good that is the result of a change in the price of that good.3. [...] The price elasticity of demand explains the magnitude of the decrease of quantity demanded that can be attributed to a given increase in price – i.e., the price elasticity of demand is defined mathematically as the percent change in quantity demanded divided by the percent change in price. [...] If the size of the percent decrease in quantity demanded is greater than the percentage change in price then the demand for that good is elastic (much the same way an elastic rubber band is able to expand and contract with ease – so does the demand for the good). [...] Cross-price elasticity refers to a change in demand for a good that is due to a change in the price of another good.