cross price elasticity this is your third type and measure of elasticity it measures the...

Cross Price Elasticity This is your third type and measure of elasticity It measures the responsiveness of the quantity demanded of one good relative to the price of another good; eg, we will analyze how a falling price of fuel affect car sales

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Cross Price Elasticity

This is your third type and measure of elasticity

It measures the responsiveness of the quantity demanded of one good relative to the price of

another good; eg, we will analyze how a falling price of fuel affect car sales

Page 2: Cross Price Elasticity This is your third type and measure of elasticity It measures the responsiveness of the quantity demanded of one good relative to

Cross Price ElasticityOur lovely equation…

CPE= Percentage Change in Quantity Demanded of Good XPercentage Change in Price of Good Y

QUANTITY OVER PRICE

Cross Price Elasticity

If there is an inverse relationship between quantity demanded of one good and the price of the other,

they are complements

If there is a positive relationship between quantity demanded and price, they are substitutes

0— +

Complements Substitutes

(at 0 there is no relevant correlation)

Page 4: Cross Price Elasticity This is your third type and measure of elasticity It measures the responsiveness of the quantity demanded of one good relative to

Cross Price ElasticityExample 1

When the cross-price elasticity of demand is negative, the goods in questions are necessarily…

Page 5: Cross Price Elasticity This is your third type and measure of elasticity It measures the responsiveness of the quantity demanded of one good relative to

Cross Price ElasticityExample 2

If the prices of pens in a market increases from $1.00 to $1.25 and the quantity of pencils demanded triples, what is the cross price

elasticity?

Cross Price ElasticityExample 3

When the demand for Cheetos declines by 30%, the quantity of Flamin’ Hot Cheetos demanded goes from 100 million to 50 million. What is the CPE?

Price elasticity of demand Wk 8. Responsiveness of changes in quantity demanded to a change in price of the product. It is measured by the formula: percentage

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CHAPTER 6 Elasticity: The Responsiveness of Demand and Supply

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Elasticity as a measure of responsiveness

ELASTICITY How quantity demanded or supplied changes with changes in price

10e 06 Chap Student Workbook - University of Dayton Workbook/10e_06_C… · 16. Cross-price elasticity (E XY) measures the responsiveness of quantity demanded of good X to changes

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Elasticity: The Responsiveness of Demand and Supply · Elasticity: The Responsiveness of Demand and Supply Chapter Summary Elasticity measures how much one variable responds to changes