XED Cross Price Elasticity of Demand

HideShow resource information
  • Created by: Simone
  • Created on: 05-01-14 13:55
Define XED
measures the responsiveness of demand for one product to changes in the price of another
1 of 9
If XED is positive +
= substitutes
2 of 9
If XED is negative -
= compliments
3 of 9
What does the size of the XED indicate?
the strength between the two products
4 of 9
What does XED 0 indicate?
2 goods with little relation
5 of 9
Business Relevance?
affects pricing decisions and marketing techniques
6 of 9
Explain pricing decisions
a good with high positive XED (close substitutes) may seek to reduce price to steal market share from competitors
7 of 9
Explain marketing techniques
strong complements can be identified and increase their revenue
8 of 9
Determinant of XED
relationship with other goods
9 of 9

Other cards in this set

Card 2

Front

If XED is positive +

Back

= substitutes

Card 3

Front

If XED is negative -

Back

Preview of the front of card 3

Card 4

Front

What does the size of the XED indicate?

Back

Preview of the front of card 4

Card 5

Front

What does XED 0 indicate?

Back

Preview of the front of card 5
View more cards

Comments

No comments have yet been made

Similar Economics resources:

See all Economics resources »See all Competitive markets resources »