## Types of Demand Elasticity

What is the meaning of elasticity of Demand ? The elasticity of Demand means a change in demand of the…

Skip to content# Cross price elasticity of demand

### Cross price elasticity of demand

#### Factors that determine the cross price elasticity of demand

## Types of Demand Elasticity

Cross price elasticity of demand is a measure that can be used to measure how quantity of demand of a good is affected by changes in the price of another good. (Prateek Agarwal, 2019).

Cross price elasticity of demand can be defined as the percentage of the quantity of demand change of a good is divided by the percentage of the price change of another good when the other factors remain unchanged.

According to sign of the cross-price elasticity of demand, we can identify two major types goods. They are substitute goods and complementary goods. If the cross-price elasticity of demand is positive, goods are **substitute **to each other and if the cross-price elasticity of demand is negative, goods are** complement **to each other. According to this exercise, model “A” is a substitute good for the model “B” and “C” tennis rackets.

There are two major types of the cross-price elasticity of demand. They are,

1. Point cross price elasticity of demand

2. Arc cross price elasticity of demand.

The sensitivity of changes in quantity of demand as the results of changes in prices of related goods is measured by the cross price elasticity of demand. We can state some factors that determine the cross price elasticity of demand as follows.

- Availability of the substitutes

When there are large number of substitutes are available, increasing price of the particular good, tend to move fast consumers to substitute goods. So, if there are more substitutes are available for a particular good, we can see higher cross price elasticity of demand and vice versa.

What is the meaning of elasticity of Demand ? The elasticity of Demand means a change in demand of the…