XED

• Cross elasticity of demand measures the responsiveness of quantity demanded of one good or service given a change in price of another.
• XE D gives us two key pieces of information: whether the goods are related to each other (substitute or complementary goods) and how closely related they are (strongly or weakly).
• The equation for XE D is: the center change in quantity demanded of good A over the percentage change in price of good B.
• If the XCD figure is positive, it means that the two goods are substitute goods.
• If the XCD figure is negative, it means that the two goods are complementary goods.
• If the XCD figure is greater than one, it means that demand between the goods is price elastic.
• If the XCD figure is less than one, it means that demand between the goods is price inelastic.
• If the XCD figure is 0, it means that demand between the goods is perfectly inelastic.
• The price of a MacBook Pro increases from £1,000 to £1,500, resulting in a 50% increase in price.