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Questions
Define or explain the following concept:
Cross Elasticity of Demand
Define cross elasticity of demand.
Solution 1
Cross elasticity of demand is the measure of the responsiveness of demand for a good to a change in the price of a related good.
`"Ec" = ("Proportionate change in quantity demanded of good X")/("Proportionate change in price of good Y")`
Solution 2
Cross elasticity of demand is the ratio of percentage change in quantity demanded of Y commodity to a given percentage change in the price of the related commodity X. It can be expressed as:
`"Ec" = ("Proportionate change in quantity demanded of Y")/("Proportionate change in price of X")`
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