Answer to Question #134521 in Microeconomics for Billi

Question

What is cross demand

Answer 1

CROSS DEMAND

The cross elasticity of demand it a concept of an economy that helps measure the responsiveness in quality demand of good when the price of another good keeps on changing. Its calculated by taking the percentage change in the quantity demanded of one good and dividing it by the percentage change in the price of the other interest.

Complementary Goods

Mostly the gross elastic demand for complementary goods is negative. This is because of the associated goods that can affect its price and demand. 

Substitute Good

The elasticity of demand for a substitute is positive always because goods demand increases when the substitute price increases.

E _xy= (percentage change in quantity of X)/ (percentage change in quantity of Y)

E _xy = (ΔQx/ Qy) / (ΔPy/ Py)

E _xy = (ΔQx / ΔPy) X (P_Y / Q_X