Cross Elasticity of Demand

Question 1

What is the equation for cross elasticity of demand?

Answer 1

% change in quantity demanded of good X divided by the % change in price of good Y

Question 2

What is the definition of XED?

Answer 2

The responsiveness of quantity demanded of a good or service to a change in price of another good or service

Question 3

XED is between -1 and 1

Answer 3

Inelastic

Question 4

In reference to proportion what does inelastic mean?

Answer 4

Demand for good X changes at a lesser proportion to the change in price of good Y

Question 5

XED is larger than 1 and less than -1

Answer 5

Elastic

Question 6

In reference to proportions describe elasticity

Answer 6

Demand for good X changes at a greater proportion to the change in price of good Y

Question 7

What does a positive XED mean?

Answer 7

The goods are substitutes

Question 8

When is XED elastic?

Answer 8

Larger than 1 but less than -1

Question 9

When is XED inelastic?

Answer 9

Between -1 and 1

Question 10

Fir what XED s are goods complements?

Answer 10

-ve

Question 11

For what XED are goods substitutes?

Answer 11

+ve