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Sub: Economics: Topic - Cross Price Elasticity of Demand

Cross price elasticity of demand measures the responsiveness of the demand for one good to a change in the price of another good. It is calculated as the percentage change in quantity demanded of one good divided by the percentage change in the price of another good. There are two types: substitute goods which can satisfy the same need and are responsive to each other's prices, and complementary goods which are often used together and have a negative cross price elasticity. Examples given are Coca-Cola and Pepsi as substitute goods, as well as cars, motorbikes, and public transport.

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Ghalib Hussain
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38 views4 pages

Sub: Economics: Topic - Cross Price Elasticity of Demand

Cross price elasticity of demand measures the responsiveness of the demand for one good to a change in the price of another good. It is calculated as the percentage change in quantity demanded of one good divided by the percentage change in the price of another good. There are two types: substitute goods which can satisfy the same need and are responsive to each other's prices, and complementary goods which are often used together and have a negative cross price elasticity. Examples given are Coca-Cola and Pepsi as substitute goods, as well as cars, motorbikes, and public transport.

Uploaded by

Ghalib Hussain
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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B.

COM – I
SUB: ECONOMICS

Cross Price Elasticity of Demand

Topic - Cross Price Elasticity of Demand


BY: Ghalib Hussain
Cross Price Elasticity of Demand
Definition
1. The percentage change in demand of one good as a result of the percentage change in the price

of another good.

2. A measure of the responsiveness of demand for a good A in relation to change in price of good
B.
Types Cross Price Elasticity of Demand
1. Substitute Goods/Products

Definition
Substitute goods are those goods that can satisfy the same necessity, they can be used for the same end.
OR
Substitute goods are identical, similar, or comparable to another product, in the eyes of the consumer.
OR
Substitute goods can either fully or partly satisfy the same needs of the customers.
Types Cross Price Elasticity of Demand
Examples of Substitute Goods
 Coca-cola and Pepsi
 Car, motorbike, bike and public transport
 Butter and margarine
 Tea and coffee
 Bananas and Apples
 Cigarettes and e-cigarettes

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