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Get Started Now- Intro Lesson: a5:08
- Intro Lesson: b5:24

__Cross Elasticity of Demand__

To measure the responsiveness of substitutes and complements of goods, we use the cross elasticity of demand.

The cross elasticity of demand measures the change of demand from one good to a change in price of a substitute or complement. In other words,

The formula for cross elasticity of demand is

If the cross elasticity of demand is

If the cross elasticity of demand is *negative*, then the it is a complement. This means when the price of the complement increases, then the demand for the good decreases.

The income elasticity of demand is the responsiveness of the demand for a good to a change in income. In other words,

The formula for income elasticity of demand is

If the income elasticity of demand is

If the income elasticity of demand is

If the income elasticity of demand is

- Introduction
**Cross & Income Elasticity of Demand Overview:**a)__Cross Elasticity of Demand__- Formula for Cross Elasticity of Demand
- Do not take the absolute value
- Positive → goods are substitutes
- Demand curve for good shifts rightward
- Negative → goods are complements
- Demand curve for good shifts leftward

b)__Cross Elasticity of Demand__- Formula for Income Elasticity of Demand
- Do not take the absolute value
- Positive → goods are normal
- Negative → goods are inferior