2. Cross Price Elasticity of Demand
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Last updated 1:59 PM on 4/24/26
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6 Terms
1
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What is cross price elasticity of demand? (XED)
A measure of the responsiveness of demand for one good as the price of another good changes.
2
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How is XED calculated?
% change of quantity demand of good X / % change of price of good Y
3
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What are substitute goods?
Two goods that could be used for the same purpose. If price of one increases, demand for the other will rise.
4
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What are complementary goods?
Goods used together. If demand for one increases demand for the other will too.
5
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How can we find out if goods are substitute or complementary from calculating XED?
Substitute goods = + XED.
Complementary goods = - XED.
6
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Draw a XED graph.
