Cross-Price Elasticity Calculator

How to Use the Cross-Price Elasticity Calculator

This calculator helps you determine the cross-price elasticity of demand between two products, which measures how the demand for one product changes when the price of another product changes.

The Cross-Price Elasticity Formula

The cross-price elasticity calculator uses the following formula:

Cross-Price Elasticity = (% Change in Demand for Product A) / (% Change in Price of Product B)

Calculation Steps

1. Enter the Initial Demand of Product A
2. Enter the Final Demand of Product A
3. Enter the Initial Price of Product B
4. Enter the Final Price of Product B
5. The calculator computes the percentage changes and cross-price elasticity
6. The result shows the Cross-Price Elasticity and its interpretation

Example Calculation

Let's walk through an example calculation:

Given:

• Initial Demand of Product A: 100 units
• Final Demand of Product A: 120 units
• Initial Price of Product B: $50
• Final Price of Product B: $60

Step-by-Step Solution:

1. Calculate % Change in Demand A: (120 - 100) / 100 * 100% = 20%
2. Calculate % Change in Price B: (60 - 50) / 50 * 100% = 20%
3. Calculate Cross-Price Elasticity: 20% / 20% = 1.0

Therefore, the Cross-Price Elasticity is 1.0, indicating that Products A and B are substitutes.

Interpreting the Results

• If Cross-Price Elasticity > 0: Products are substitutes
• If Cross-Price Elasticity < 0: Products are complements
• If Cross-Price Elasticity = 0: Products are unrelated

Note: Cross-price elasticity can vary depending on the specific market and time frame. This calculator provides a basic measure of the relationship between two products.