2.6 cross elasticity of demand Flashcards

(5 cards)

1
Q

what is XED

A

the responsiveness of demand of one good to changes in the price of a related good (either substitute or complementary)

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2
Q

how to calculate XED

A

% change in quantity demanded of good A / % change in price of good B

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3
Q

what can XED also be seen as

A

CED

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4
Q

if a good is complimentary what will the result of XED be

A

it will have a negative sign (inverse relationship between the two)

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5
Q

if a good is substitute what will the result of XED be

A

it will have a positive sign (positive relationship between the two )

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