cross elasticity of demand
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7 Terms
1
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what is cross (price) elasticity of demand?
the responsiveness of quantity demanded of one good in response to a change in price of another
2
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what is the equation for XED?
percentage change in demand for good x / percentage change in price of good y
3
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if XED = 0 what does that mean?
the goods are unrelated
4
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if XED is positive, what are the goods in relation to each other?
substitutes
5
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if XED is negative, what are the goods in relation to each other?
compliments
6
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if XED is less than -1 what does that mean?
strong compliments
7
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if XED is more than 1, what does that mean?
strong substitute