XED Flashcards
1
Q
What is XED
A
responsiveness of demand for good A to a change in price of good B
2
Q
Equation for XED
A
%QD for Good A / % change in P for Good B
3
Q
When XED is positive the goods are …
A
Substitute goods
4
Q
When XED is negative the goods are …
A
Complimentary goods
5
Q
Business significance
A
- Helps firms to understand the impact of their rivals pricing decisions
- Helps firms to understand the impact of their own pricing decisions
6
Q
The coefficient of XED
A
if the number is high strong relationship, number low weak relationship
7
Q
Diagram complementary goods
A
if the supply of one good increases, demand for the other good will increase
8
Q
Diagram substitute goods
A
If the supply of one good increases, demand for the other will decrease
