The cross-price elasticity of demand gives us the rate of change in desired quantity demanded as the price of some related good changes. The general form of this elasticity is shown to the right. It is the ratio of the %Q of one good (x in this case) to the %P of another good (y in this case). For example, we might wish to ask what is the change in quantity demanded for economics textbooks when average college tuition increases by 10%.

   Unlike the own-price elasticity, the sign of the cross-price elasticity of demand can go either way. If the goods are complements, we learned that an increase in the price of one will lead to a reduction in desired quantity demanded of the other, indicating a negative sign. If the goods are substitutes, an increase in the price of one increases demand for the other, indicating a positive sign.

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