# Cross & income elasticity of demand

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##### Intros

###### Lessons

**Cross & Income Elasticity of Demand Overview:**__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

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

##### Examples

###### Lessons

**Calculating Cross Elasticity of Demand**

Suppose that a company decides to increase the price of juice by 20%. By doing this, they see a 15% increase in the quantity of coffee.- A company decides to increase their price of candy from $5 to $10. By doing so, the quantity of water decreases from 80 to 50, and decreases the quantity of candy from 100 to 50.
**Calculating Income Elasticity of Demand**

If Kevin's income increases from $100 to $150 a day, he increases his demand for ice cream by 10%, and decreases his demand for coffee by 20%. Calculate Kevin's income elasticity of demand for- If Patsy's income increases from $50 to $100 a week., she increases her demand for chocolate from 2 kg to 5 kg.