Cross Elasticity of Demand (XED) Flashcards
(9 cards)
What is XED
Cross elasticity of demand is the responsiveness of demand for good B to change in price of good A
XED equation
% change in demand for good B /
% change in price of good A
what are goods in competitive demand called
substitute goods
what are goods called when they are consumed together
complementary goods
What does a substitutes XED graph look like
price on the y-axis, quantity on the x-axis, upward-sloping curve
What does a complementary XED graph look like
price on the y-axis, quantity on the x-axis, downward sloping curve
What will the XED value of two unrelated goods look like
it will have a value of 0
What will the XED value of two substitute goods look like
it will be greater then 0
What will the XED value of two complementary goods look like
it will be less then 0
