Calculating Cross Price Elasticity of Demand
In order to calculate the cross price elasticity of demand, you need to follow these steps:

Determine the Change in Quantity Demanded
- The first step is to determine the change in quantity demanded of one product in response to a change in the price of another related product. This can be done by comparing the initial quantity demanded with the new quantity demanded after the price change.

Determine the Change in Price
- Next, you need to determine the change in price of the related product. This involves comparing the initial price with the new price after the change.

Calculate the Cross Price Elasticity
- Once you have the changes in quantity demanded and price, you can calculate the cross price elasticity of demand using the formula:
Cross Price Elasticity of Demand = (% Change in Quantity Demanded of Product A) / (% Change in Price of Product B)

Interpreting the Cross Price Elasticity
- If the cross price elasticity is positive, it indicates that the two products are substitutes, meaning that an increase in the price of one product leads to an increase in the quantity demanded of the other product.
- If the cross price elasticity is negative, it indicates that the two products are complements, meaning that an increase in the price of one product leads to a decrease in the quantity demanded of the other product.
- If the cross price elasticity is zero, it indicates that the two products are unrelated, meaning that a change in the price of one product does not affect the quantity demanded of the other product.