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Examples
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Think cross-elasticity of the factors of production, cross-border wage differential, balance of trade, farm subsidies, cash crops, black markets, general equilibrium models.
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The cross-elasticity of demand for good X with respect to good Y is the percent change in demand for good X divided by the percent change in price for good Y.
Conservapedia - Recent changes [en] Aschlafly 2010
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February 2010 (EST):: The cross-elasticity of demand for good X with respect to good Y is the percent change in demand for good X divided by the percent change in price for good Y.
Conservapedia - Recent changes [en] Aschlafly 2010
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If the cross-elasticity were negative, that would mean that when the price of one good goes up, the demand for the other good goes down, as is the case for goods C and D.
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Since the cross-elasticity of goods A and B is positive, that means that whenever the price of one of the goods goes up, the demand for the other good increases as well.
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Review question: the cross-elasticity of A with respect to B is positive, and C with respect to D is negative.
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If, however, good A sees a 20% increase in demand based on a 20% increase in price of good B, then their cross-elasticity in demand is 20%/20% = 1.
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If the cross-elasticity were negative, that would mean that when the price of one good goes up, the demand for the other good goes down, as is the case for goods C and D. P-Price, Q-Quantity, 30-Revenue.
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A negative cross-elasticity in demand means they are complements.
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If, however, good A sees a 20% increase in demand based on a 20% increase in price of good B, then their cross-elasticity in demand is 20%/20% = 1.
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