Cross Elasticity Of Demand Flashcards
1
Q
XED meaning
A
XED measures the responsiveness of quantity demanded of a good/service given a change in price of another.
2
Q
XED equation
A
% change in quantity demanded of good A/ %change in price of good B
3
Q
Positive figure
A
Means two goods are substitutes
4
Q
Negative figure
A
Means two goods are complements
5
Q
> 1
A
Demand between the two goods is price elastic (strongly related)
6
Q
<1
A
Demand between the two goods is price inelastic (weakly related)
7
Q
0
A
Demand between the goods is perfectly price inelastic (No relationship)
