Cross Elasticity of Demand (XED)
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5 Terms
XED
Cross-Price Elasticity of Demand calculation that measures how the quantity demanded of one good changes in response to a change in the price of another good.
Complementary Goods
Goods that are typically consumed together, where a decrease in the price of one good leads to an increase in the quantity demanded of the other good.
Substitutes
Goods that can be used in place of each other, where an increase in the price of one good leads to an increase in the quantity demanded of the other good.
Negative XED
Indicates that the two goods are complements, as a decrease in the price of one good leads to an increase in the quantity demanded of the other.
Positive XED
Indicates that the two goods are substitutes, as an increase in the price of one good leads to an increase in the quantity demanded of the other.
Flashcards (56)