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Cross-Elasticity of Demand (XED)
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Measure of the responsiveness of demand for one good to a change in price of another good, involving a shift in demand curve
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XED = percentage change in Qdx / percentage change in Py
2 kinds of information from XED
XED interpreter
XED is important for a firm because both either substitute goods or complementary goods have strong relations between goods, so the value of XED could be a valuable reference for business strategy.
The effect of a change in price of substitutes (ex. Pepsi & Cocacola)
The effect of a change in price in complements (ex. Tennis Ball & Tennis Racket)
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