Cross Price Elasticity Calculator
Calculate the cross-price elasticity of demand (CPDE) — measures how much demand for one good changes when the price of another good changes. CPDE = (% change in quantity demanded of good A) / (% change in price of good B).
Formula
CPDE = (% Δ Quantity A) / (% Δ Price B)
- Substitute goods (CPDE > 0): price ↑ in B → demand ↑ for A (e.g., butter and margarine)
- Complementary goods (CPDE < 0): price ↑ in B → demand ↓ for A (e.g., cars and fuel)
- Independent goods (CPDE ≈ 0): no relationship (e.g., shoes and coffee)
- The sign of CPDE indicates the relationship; magnitude shows strength
Cross Price Elasticity Example
Inputs
- Initial Quantity A: 100 units
- Final Quantity A: 120 units
- Initial Price B: 50 currency
- Final Price B: 60 currency
Good A demand increases from 100 to 120 (+20%) while Good B price rises from 50 to 60 (+20%). CPDE = 20% / 20% = 1.0, indicating substitute goods with proportional relationship.
Frequently asked questions
What is cross-price elasticity of demand?
CPDE measures how much demand for one good changes when the price of another good changes, revealing whether goods are substitutes, complements, or independent.
What does positive vs negative CPDE mean?
Positive CPDE = substitute goods (butter/margarine); Negative CPDE = complementary goods (cars/fuel).
What is considered high vs low elasticity?
Elastic (|CPDE| > 1): demand is very responsive; Inelastic (|CPDE| < 1): demand is less responsive.
Why is this important for businesses?
Understanding CPDE helps set pricing strategy and predict how competitor price changes affect your product demand.