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29 Nov 2021

Introduction

Cross price elasticity of demand measures the relationship between price and demand, i.e., change in quantity demanded by one product with change in price of second product, where if both the products are substitutes, it will show a positive cross elasticity of demand and if both are complementary goods, it would show an indirect or negative cross elasticity of demand. In simple term, it measures sensitivity of demand for one quantity X when the price of related good Y is changed.

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