1.2|3 Cross-Price Elasticity of Demand (XED) Flashcards
1
Q
What is the Cross Price Elasticity of Demand (XED) ?
A
Measures the responsiveness of Gd in GOOD X to changes in P of GOOD Y
2
Q
How is XED calculated ?
A
% Change Qd (Good X) / % Change P (Good Y)
3
Q
What is a Substitute Good
A
A good that is demanded more, when the price of a related good rises
4
Q
What will the XED of a Substitute Good be ?
A
XED is positive
5
Q
What type of demand are two substitute good in ?
A
Competitive demand
6
Q
What is a complementary good ?
A
A good that is demanded more, when the price of a related good falls
7
Q
What will the XED of a complementary good be ?
A
XED is negative
8
Q
What type of demand are two complementary good in ?
A
Joint Demand
9
Q
What does a higher numerical XED value mean ?
A
The stronger the relationship between two goods
