Cross Elasticity of Demand (XED) Flashcards
1
Q
Define XED
A
How responsive the quantity demanded of one good is to a change in price of another good
2
Q
How do we calculate XED
A
%change in quantity demaded of good x/%change in price of good y
3
Q
If XED is positive,the two goods are … goods
Fill in the blank
A
Substitute
4
Q
If XED is negative, the two goods are … goods
Fill in the blank
A
Compliment
5
Q
What is a substitute good
A
A good that can be used in place of another
6
Q
What is a compliment good
A
A good that can be used together with another good
7
Q
If XED is 0, the goods are …
Fill in the blank
A
Unrelated
