What is Cross Price Elasticity?

Cross price elasticity of demand is an economic concept that measures how the demand for one product changes in response to a price change of another product. It helps businesses and economists understand the relationship between different goods in the market. This metric is crucial for pricing strategies, product positioning, and market analysis.

How to Use the Cross Price Elasticity Calculator

Step 1: Enter the Initial Price of Product A

Input the original price of the first product (Product A) in the designated field. This is the starting point for your calculation.

Step 2: Enter the Final Price of Product A

Input the new price of Product A after the price change. This could be either an increase or decrease from the initial price.

Step 3: Enter the Initial Quantity of Product B

Input the original quantity demanded of the second product (Product B) before the price change of Product A.

Step 4: Enter the Final Quantity of Product B

Input the new quantity demanded of Product B after the price change of Product A. This reflects how the demand for Product B has changed in response to Product A's price change.

Step 5: Click "Calculate Elasticity"

After entering all the required information, click the "Calculate Elasticity" button. The calculator will process your inputs and display the results.

Step 6: Interpret the Results

The calculator will show the cross price elasticity value and provide an interpretation. A positive value indicates substitute goods, while a negative value suggests complementary goods. The magnitude of the elasticity (greater or less than 1) indicates whether the demand is elastic or inelastic.