Cross Elasticity Of Demand Flashcards
1
Q
What is the formula for XED?
A
XED= % change QD of A / %change price of B
2
Q
What is XED?
A
Cross elasticity of demand measures how QD of one good will respond to a change in price of another good
3
Q
What good will always be negative for XED?
A
Complementary goods
Eg. Iphones and iphone alls are complementary goods.
4
Q
What good will always be positive for XED?
A
Substitute goods.
Eg apple and samsung phones
5
Q
What does it mean if XED = 0
A
Change in price for one good does not affect the QD of another good as the two goods are unrelated.
