Question

Distinguish between price elasticity of demand and cross elasticity of demand. Explain with examples the importance of the concept of elasticity of demand.​

Answer 1

Answer:

Well,

Price elasticity of demand:-

• It refers to the degree of responsiveness of quantity demanded to change in its price.

Cross demand:-

• Demand primarily dependent upon prices of related goods is called cross demand. The complementary goods and substitutes are called related goods. In case of complementary goods like pen and ink demand for good is inversely related to the prices of other goods but the case in substituting goods are just opposite. Demand for substituting goods is directly related to prices.