Cross Elasticity of Demand
Watch this video to learn how to calculate the cross elasticity of demand for products that are complements and for products that are substitutes. You can think of complemenatry products like popcorn and a movie ticket, when the price of one goes up, the quantity demanded goes down for both, thus their cross price elasticity will show a negative relationship. The same applies for products that are substitutes, like popcorn and candy at a movie theater. When the price of popcorn rises, the quantity demanded for popcorn decreases but for candy it goes up, thus their cross price elasticity will show a positive relationship.
Source: Khan Academy
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Last modified: Friday, February 26, 2021, 8:41 AM