Cross elasticity of demand ( XED ) Flashcards
1
Q
What is XED ?
A
The responsiveness of demand given a change in price of another good
2
Q
What is the equation for XED ?
A
% change in Q demanded of good A / % change in price of good B
3
Q
What does a + XED value mean ?
A
It is a substitute
4
Q
What does a - XED value mean ?
A
It is a complementary good
5
Q
What does a > 1 XED value mean and its relation to the good ?
A
It is elastic and strongly correlated to each other
6
Q
What does a < 1 XED value mean and its relation to the good ?
A
It is inelastic and weakly related
7
Q
What does a 0 XED value mean and its relation to the good ?
A
It is perfectly inelastic and there is no relation to each other
8
Q
A
