Interpretation of cross elasticity of demand
Hello,
I have a question relating to the interpretation of cross elasticity of demand.
E.g:
Cross elasticities of demand for Pork and Beef:
beef with respect to the price of pork 0.10
pork with respect to the price of pork 0.25
In the example above,
(1) Both are substitutes for each other.
(2) There is little relation between pork and beef because of the small value.
Is it correct?
What more can be commented on the values?
Thank you
I have a question relating to the interpretation of cross elasticity of demand.
E.g:
Cross elasticities of demand for Pork and Beef:
beef with respect to the price of pork 0.10
pork with respect to the price of pork 0.25
In the example above,
(1) Both are substitutes for each other.
(2) There is little relation between pork and beef because of the small value.
Is it correct?
What more can be commented on the values?
Thank you
yes they're substitutes.
substitutes have a positive XED whilst complementary goods have a negative XED.
since the values lie between 0 and 1, it can be said the XED is inelastic.
substitutes have a positive XED whilst complementary goods have a negative XED.
since the values lie between 0 and 1, it can be said the XED is inelastic.
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