Cross Elasticity of Demand (XED) Flashcards
1
Q
XED definition
A
measures the responsiveness of quantity demanded of a good / service given a change in price of another
2
Q
XED equation
A
XED = percentage change quantity demanded for good a / percentage change price for good b
3
Q
Positive XED
A
substitute good
the bigger the number, the stronger the substitute
4
Q
Negative XED
A
complimentary good
the smaller the number (-5,-6,-7 etc), the stronger the compliments
5
Q
XED = 0
A
demand between the goods is perfectly price inelastic
