#cfa #cfa-level-1 #economics #microeconomics #reading-13-demand-and-supply-analysis-introduction #study-session-4
Recall that the price of another good might very well have an impact on the demand for a good or service, so we should be able to define an elasticity with respect to the other price, as well. That elasticity is called the cross-price elasticity of demand and takes on the same structure as own-price elasticity and income elasticity of demand, as represented in Equation 26.
Equation (26)
Edpy=%ΔQdx%ΔPy=ΔQdxQdxΔPyPy=(ΔQdxΔPy)(PyQdx)
If you want to change selection, open document below and click on "Move attachment"
4.4. Cross-price Elasticity of Demand: Substitutes and Complements
It should be clear by now that any variable on the right-hand side of the demand function can serve as the basis for its own elasticity. Recall that the price of another good might very well have an impact on the demand for a good or service, so we should be able to define an elasticity with respect to the other price, as well. That elasticity is called the cross-price elasticity of demand and takes on the same structure as own-price elasticity and income elasticity of demand, as represented in Equation 26.
Equation (26)
Edpy=%ΔQdx%ΔPy=ΔQdxQdxΔPyPy=(ΔQdxΔPy)(PyQdx)
Note how similar in structure this equation is to own-price elasticity. The only difference is that the subscript on P is now y, indicating the price of some other good, Y, Summary
status | not read | | reprioritisations | |
---|
last reprioritisation on | | | suggested re-reading day | |
---|
started reading on | | | finished reading on | |
---|
Details