XPED

    Cards (11)

    • What does Cross Price Elasticity of Demand (Xped) examine?
      It examines price changes of one good affecting another
    • How does Cross Price Elasticity of Demand relate to competing goods?
      It shows how demand for one good changes with price of another
    • If Vauxhall cuts prices by 10%, what happens to Ford's demand?
      Ford's demand might be expected to fall
    • What does a Cross Price Elasticity of Demand of +1.2 indicate?
      Ford cars are relatively cross price elastic
    • What is the formula for calculating Cross Price Elasticity of Demand?
      Xped = %ΔQd of good A / %ΔP of good B
    • If demand for Ford falls by 12% when Vauxhall's price drops by 10%, what is Xped?
      Xped = +1.2
    • What does a positive Cross Price Elasticity indicate about two goods?
      They are competing or substitute goods
    • What happens to car demand when petrol prices rise?
      Demand for cars is expected to fall
    • If petrol prices rise by 20% and car demand falls by 5%, what is Xped?
      Xped = -0.25
    • What does a negative Cross Price Elasticity of Demand indicate?
      Goods are complementary and consumed together
    • What does a Cross Price Elasticity between 0 and 1 imply?
      Demand is cross price inelastic
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