The cross price elasticity of demand measures how the quantity demands of one good responds to a change in the price of another good.it is calculated as the percentages change in quantity demanded of good 1 divided by the percentage change in the price of good 2.
Cross -price elasticity of demand = percentages change in quantity demanded of good 1
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percentages change in the price of good 2
* The cross -price elasticity is sometime positive and negative number depends on
whether the two good are substitutes or complements.
*An increases in hot dog prices induces people to grill hamburgers instead.
because the price of hot dog and the quantity of hamburger demanded move in same direction,
the cross the price elasticity is positive .
*conversely ,complements are good that are typically used together , such as computer and software .
in the case , the cross-price elasticity is negative ,indicating that an increases in the price of computer reduces the quantity of software demanded.
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