Cross Elasticity Of Demand Flashcards
1
Q
XED
A
Measures how much quantity demanded of good A will respond to a change in price of good B
This helps businesses understand how competing firms prices affect demand for their goods
%change in Qd good A
—————————————
%change in P good B
2
Q
Substitutes vs Compliments
A
XED for Substitutes is positive
XED for complements is negative
XED for unrelated goods is zero
3
Q
Substitutes
A
The greater the number the closer the substitutes
