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3 Tutorials that teach Cross-Price Elasticity / Complements & Substitutes
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Cross-Price Elasticity / Complements & Substitutes

Cross-Price Elasticity / Complements & Substitutes

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Author: Catherine Barry
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This lesson will explain Cross-Price Elasticity / Complements & Substitutes

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Tutorial

Notes on "Cross-Price Elasticity/ Complements & Substitutes"

Terms to know

Cross-Price Elasticity 

Change of demand that occurs due to change in price of

substitutes or complements.

   (QuantityA - QuantityB) / (QuantityA + QuantityB)

   all divided by

   (PriceA - PriceB) / (PriceA + PriceB)

Substitute Goods 

As the price one good increases, the demand for an 

alternative good meeting the same consumer needs, increases.

Complement Goods

A good for which the demand increases as the price of an 

associated good decreases.

Formulas to Know
Cross-Price Elasticity

E space equals space fraction numerator begin display style bevelled fraction numerator left parenthesis Q subscript A minus Q subscript B right parenthesis over denominator left parenthesis Q subscript A plus Q subscript B right parenthesis end fraction end style over denominator begin display style bevelled fraction numerator open parentheses P subscript A minus P subscript B close parentheses over denominator left parenthesis P subscript A plus P subscript B right parenthesis end fraction end style end fraction
asterisk times T h e space p r i c e s space b e l o n g space t o space o n e space g o o d comma space t h e space q u a n t i t i e s space b e l o n g space t o space t h e space o t h e r space g o o d