Editing Cross elasticity of demand (section)

{{Short description|Economic measure of a good's price change}}
{{Economics sidebar}}
In [[economics]], the '''cross''' (or '''cross-price''') '''elasticity of demand''' ('''XED''') measures the effect of changes in the price of one [[Good (economics)|good]] on the [[Demand|quantity demanded]] of another good. This reflects the fact that the quantity demanded of good is dependent on not only its own price ([[price elasticity of demand]]) but also the price of other "related" good. 

The cross elasticity of demand is calculated as the [[ratio]] between the percentage change of the quantity demanded for a good and the percentage change in the [[price]] of another good, [[ceteris paribus]]:<ref>{{Cite web|title=OECD Glossary of Statistical Terms – Cross price elasticity of demand Definition|url=https://stats.oecd.org/glossary/detail.asp?ID=3185|access-date=2021-04-17|website=stats.oecd.org}}</ref><math display="block">\text{XED}
= \frac{\%\text{ change in quantity demanded of good A}}{\%\text{ change in price of good B}}</math>The [[Sign (mathematics)|sign]] of the cross elasticity indicates the relationship between two goods. A negative cross elasticity denotes two products that are '''complements''', while a positive cross elasticity denotes two products are '''substitutes'''. 
If products A and B are complements, an increase in the price of B leads to a decrease in the quantity demanded for A, as A is used in conjunction with B.<ref>{{Cite journal|last1=Hemmati|first1=M.|last2=Fatemi Ghomi|first2=S.M.T.|last3=Sajadieh|first3=Mohsen S.|date=2017-09-04|title=Inventory of complementary products with stock dependent demand under vendor managed inventory with consignment policy|journal=Scientia Iranica|pages=0|doi=10.24200/sci.2017.4457|issn=2345-3605|doi-access=free}}</ref> Equivalently, if the price of product B decreases, the demand curve for product A shifts to the right reflecting an increase in A's demand, resulting in a ''negative'' value for the cross elasticity of demand. If A and B are substitutes, an increase in the price of B will increase the market demand for A, as customers would easily replace B with A,<ref>{{Citation|last1=Das|first1=R. L.|title=Some Studies on EPQ Model of Substitutable Products Under Imprecise Environment|date=2019-09-01|url=http://dx.doi.org/10.1007/978-981-13-9698-4_18|work=Asset Analytics|pages=331–360|place=Singapore|publisher=Springer Singapore|isbn=978-981-13-9697-7|access-date=2021-04-17|last2=Jana|first2=R. K.|doi=10.1007/978-981-13-9698-4_18|s2cid=202935211|url-access=subscription}}</ref> like McDonald's and Domino's Pizza.