# Cross Elasticity of Demand

The cross elasticity of demand measures the responsiveness of the quantity demanded, when the price of another good changes. It is defined as the percentage change in the quantity demanded divided the percentage change in the price of the second good.

eAB = (ΔQA/QA)/(ΔPB/PB)

The cross elasticity gives us important information about the economic relation between the goods and services.

# Substitute Goods

## Definition of Substitute Goods

Substitute goods are those goods that can satisfy the same necessity, they can be used for the same end.

# Complementary Goods

## Definition of Complementary Goods

Complementary goods are goods that are usually consumed together or that have the ability to provide a higher utility when consumed together.

# Income Elasticity

The income elasticity of the demand is defined as the proportional change in the quantity demanded, divided the proportional change in the income.

If the consumer income increases, the consumer will be able to purchase a higher quantity of goods and services. The income elasticity of demand measures the responsiveness of the demand with respect to changes in the consumer income.

## Income Elasticity of Demand Formula

ei = (ΔQ/Q)/(ΔI/I)

Where: