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Cross-Elasticity
A quantitative measure of how the demand for one product changes in response to the price change of another product, important in pricing strategy.
Implications
The measure of how the demand for one product changes in response to a price change in another product, often used to analyze the relationship between substitutes or complements.
Example
Example: A snack manufacturer analyzes cross-elasticity to understand how a price increase in its potato chips affects the demand for its competitor�s similar product, finding that they are close substitutes.
Related Terms
Different from price elasticity, which measures how demand changes with the product's own price change, cross-elasticity focuses on the relationship between different products.
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