AP MicroeconomicsElasticity
Cross-Price Elasticity of Demand
Cross-price elasticity of demand measures how responsive the quantity demanded of one good is to a change in the price of another good.
It is calculated as the percentage change in quantity demanded of Good A divided by the percentage change in price of Good B. If the ratio is positive, the goods are considered substitutes. If the ratio is negative, the goods are considered complements.
Formula / Example
Cross-Price Elasticity of Demand = (% Change in Quantity Demanded of Good A) / (% Change in Price of Good B)
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