XED Flashcards
1
Q
When is the XED for two substitutes positive
A
When they are close substitutes
2
Q
Complement goods
A
Are in joint demand and the value of XED is always negative.
The stronger the relationship, the higher the co-efficient of XED.
3
Q
XED of unrelated products
A
0 XED
4
Q
Pricing for substitutes
A
If a competitor cuts the price of s rival product, firms use estimates of XED to predict the effect on demand and total revenue of their own product.
5
Q
Pricing for complementary goods
A
Popcorn, soft drinks and cinema tickets have a high negative XED- they are strong complements
