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Lesson 14 of 14

Cross Price Elasticity of Demand

Cross price elasticity of demand refers to the responsiveness of demand of one good to changes in the price of a related good (either a substitute or a complementary product).

The above equation calculates the price elasticity of demand for good y for a change in price of good x.

For complementary products, cross price elasticity will have negative sign, signifying an inverse relationship between the two. So, when the price of a complementary product rises, the demand for the product itself decreases.

For a substitute, cross price elasticity will have a positive sign, signifying a positive relationship between the two. So, when the price of a substitute product rises, the demand for the product itself increases.

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Income Elasticity of Demand

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Demand and Supply

14 lessons

Lessons

1
Types of Markets in Economics
2
Demand Function and Demand Curve
3
Supply Function and Supply Curve
4
Shifts in Demand and Supply Curves
5
Aggregating Demand and Supply Curves and Concept of Equilibrium
6
Excess Demand and Excess Supply
7
Stable and Unstable Equilibrium
8
Types of Auctions
9
Four Methods of Distributing Government Securities
10
Consumer and Producer Surplus
11
Effects of Government Regulation on Demand and Supply
12
Price Elasticity of Demand
13
Income Elasticity of Demand
14
Cross Price Elasticity of Demand

Quizzes

Demand and Supply Analysis: IntroductionDemand and Supply Analysis: Consumer DemandDemand and Supply Analysis: The Firm
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