Cross elasticity of demand

Cross elasticity of demand (XED) is a numerical measure of the responsiveness of the quantity demanded for one product following a change in the price of another related product, ceteris paribus.

The formula for cross elasticity of demand used is as follows :

XED =

% change in quantity demanded of product A
━━━━━━━━━━━━━━━━━━━
% change in the price of product B



Products that are substitutes for each other will have positive values for the XED

Products that are complements will have negative values of XED

Two goods that are independent have a zero cross elasticity of demand