Cross elasticity of demand
Definition. Cross elasticity of demand measures the responsiveness of the quantity demanded of one good to a change in the price of another good. It is calculated as the percentage change in quantity demanded of the first good divided by the percentage change in the price of the second.
A positive value indicates substitutes and a negative value indicates complements, with the magnitude showing how closely the goods are related. Unrelated goods have a value close to zero.
This term belongs to Income and Cross Elasticity of Demand in A Level Economics. Read the full chapter for the diagrams, worked examples and exam technique.
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