Cross price elasticity of demand measures the responsiveness of demand good or service A when there is a change in the price of  good or service B.

The key word there is responsiveness, all of your elasticity definitions must include the word responsiveness.

In short, XPeD tells us, when there is a change in price of good A, measured by %, will demand for a  good or service B change by a bigger or smaller %?

​The formula for cross price elasticity of demand can be seen below.

Complimentary and Substitute Goods

XPeD can be expressed as a positive or a negative number.  This is important as it tells us information about the relationship between good A and good B. A description of each is detailed below

Complimentary Goods

• As the price of good A falls, quantity demanded for good B increases. therefore...
• XPeD value is negative​.
• Complimentary goods are goods we would typically buy together e.g. Playstation consoles and games.

Substitute Goods

• As the price of good A falls, quantity demanded for good b decreases. therefore...
• XPeD value is positive. ​
• Substitute goods are goods we would typically buy as replacements of each other e.g. margarine instead of butter.