Why is the concept of cross price elasticity of demand important?

1 Answer
Nallasivam V
Sep 3, 2015

We can understand relation between the good and reference good.

Explanation:

If Cross Elasticity is #oo# both the goods are perfect substitutes.
If Cross Elasticity is positive both the goods are substitutes.
If Cross Elasticity is negative both the goods are complements.
If Cross Elasticity is zero both the goods are unrelated.

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