cross elasticity of demand

Question 1

what is cross elasticity of demand

Answer 1

measures the responsiveness of the demand for a product following a change in price of another product.
and the formula is
XED=percentage change in q demanded of good a/ percentage change in price of good b

Question 2

xed complements

Answer 2

good a and good b are complements
if the price of good b decreases percentage change in price will be negative (bottom half of equation negative)
therefore the percentage change of quantity demanded for good A will increase and will be positive (top half of equation will be positive)
therefore our xed for complementary goods will be negative overall due to there always being a decreasing value

Question 3

subsititute goods

Answer 3

good a and good b are substitutes
if the price of good goes up percentage change of good b will go up
therefore the quantity of good a its substitute will also rise as consumers aim to minimise costs

Question 4

unrelated goods

Answer 4

good a and good b are unrelated goods
therefore there is an xed of 0 if the price of good a went down or up this will have no effect of quantity demanded of good b