Cross Elasticity of Demand (XED)

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Formula: XED = %ΔQa ÷ %ΔPb

XED = -0.67

Working: XED = 4 ÷ (-6) = -0.67

Interpretation: XED = -0.67 → complements. Remember: Party Season Nearly Christmas — Positive substitutes, Negative complements.

Exam tip: Remember Max and Sanjeeth at a concert — the QUEUE before you PEE: put %ΔQ before %ΔP (quantity change on top, price change on the bottom).

XED mnemonic

Party Season Nearly ChristmasPositive substitutes, Negative complements. If XED > 0, goods are substitutes (e.g. butter and margarine). If XED < 0, complements (e.g. printers and ink).

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