Cross elasticity of demand - XED

Question 1

Cross elasticity of demand

Answer 1

The responsiveness of a change in demand of one good x, to a change in price of another good, Y.

Question 2

Formula

Answer 2

%change in quantity demanded of good x / %change in price of good y

Question 3

Complements

Answer 3

If the one good becomes more expensive, the quantity demanded for both goods will fall.
XED is always negative
E.g. Razor and shaving cream

Question 4

Substitutes

Answer 4

A good that can replace another.
XED is always positive