We know that cross price elasticity compares the responsiveness in Quantity demanded for Good X caused by a change in the price of good Y. If the elasticity is positive what does it mean? If it is negative what does it mean?
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when we say of price elasticity, as you know, we mean the responsiveness on quantity demanded with the price. when the elasticity is negative, it means that the law of demand and supply is being followed. the law of demand and supply being that increase in prices lead to decrease in demand and vise versa. when the relationship between the demand and price is such, then that is negative elasticity. positive elasticity on the other hand is where increase in prices leads to increase in demand. for instance for the giffen goods eg fashion products. That is what is meant by positive and negative elasticity.
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Oct 20th, 2015
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