Suppose goods a and b are substitutes for each other. We would expect the cross-price elasticity between these two goods to be.

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19-09-2022
Business

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Suppose goods a and b are substitutes for each other. We would expect the cross-price elasticity between these two goods to be.

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qwlilly qwlilly · Answer 1 · 2022-09-22T11:43:51-04:00

The price elasticity between two substitute goods in cross-price elasticity. The cross-price elasticity are going to be positive.

The cross elasticity of demand is an economic concept that measures the responsiveness within the quantity demanded of 1 good when the value for one more good changes. Also called cross-price elasticity of demand, this measurement is calculated by taking the proportion change within the quantity demanded of 1 good and dividing it by the share change within the price of the opposite good. A positive cross elasticity of demand implies that the demand permanently A will increase because the price of fine B goes up. this suggests that goods A and B are good substitutes. So if B gets dearer, people are happy to change to A.

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