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1 Cross Elasticity
Cross demand refers to the quantities of a commodity or service which will be purchased with reference to changes, not of that particular commodity, but of other inter-related commodities, other things remaining the same.
Cross elasticity of X = % change in quantity demand of X / % change in quantity of Y
Inter-related commodities can be either substitutes or complementary
1.1 Substitute Products
When price of a substitute increases, quantity demanded will increase thus cross demand curve slopes upwards (i.e. is positive) showing that more quantities of a commodity will be demanded whenever there is a rise in price of a substitute commodity.
1.2 Complementary Goods
When price of a complementary good increases, quantity demanded will decrease thus cross demand curve slopes downwards.
