cross elasticity of demand XED Flashcards
1
Q
XED measures
A
the responsivness of one good or service given a change in price of another
2
Q
XED=
equation
A
%change in QDa/%change in Pb
3
Q
+
A
substitute
4
Q
-
A
complement
5
Q
greater than 1
A
demand between the goods is price eleastic ( strongly related)
when the price of one good changes,
the QD for the other will change proportionatly more than the change in price of the othe
6
Q
less than 1
A
demand between the goods is price inelastic (weakly related)
as the price of one good changes, QD for the other good changes but proportionatly less than the change in price of the first good
7
Q
0
A
demand between the goods are perfectly price inelastic (no relationship)
