cross elasticity of demand Flashcards
1
Q
what is cross elasticity of demand
A
measures the responsiveness of quantity demanded of good a to a change in the price of good b
2
Q
equation for cross elasticity of demand
A
% change in qd of a/ % change in p of good b
3
Q
how can you tell what type of a good is from cross elasticity
A
positive- substiitutes
negative- complements
4
Q
different types of elasticity XED
A
- > 1 then the demand between goods is price elastic (strong relationship)
-<1 the demand between the goods is price inelastic
-o demand between goods is perfectly inelastic (no relationship)
