Cross-Price Elasticity of Demand

A change in the price of one good can shift the quantity demanded for another good. If the two goods are

complements, like bread and peanut butter, then a drop in the price of one good will lead to an increase in the

quantity demanded of the other good. However, if the two goods are substitutes, like plane tickets and train

tickets, then a drop in the price of one good will cause people to substitute toward that good, and to reduce

consumption of the other good. Cheaper plane tickets lead to fewer train tickets, and vice versa.

The cross-price elasticity of demand puts some meat on the bones of these ideas. The term “cross-price”

refers to the idea that the price of one good is affecting the quantity demanded of a different good. Specifically,

the cross-price elasticity of demand is the percentage change in the quantity of good A that is demanded as a

result of a percentage change in the price of good B.
{"creationdate": "2022-12-07T14:15:44-06:00", "producer": "Prince 14.2 (www.princexml.com)", "creator": "PDFMiner", "file_hash": "830b81f41611ac67a490444dbb5d6aed292224606965b06965b914443c93331a", "total_pages": 597, "source_file": "downloads\\business\\economics\\Microeconomics3e.pdf", "title": "Principles of Microeconomics 3e", "source": "downloads\\business\\economics\\Microeconomics3e.pdf", "batch_upload": true, "uploaded_via": "batch_uploader", "moddate": "2022-12-07T14:23:05-06:00", "upload_timestamp": "2026-02-07T15:37:44.339247", "file_size_mb": 26.99, "file_type": ".pdf", "file_name": "Microeconomics3e.pdf"}