ECONOMICS Essay Example | Topics and Well Written Essays - 500 words

ECONOMICS - Essay Example In a perfectly competitive market where the consumer is well-informed of the prices of all commodities sold in the market, Perfectly Price Elastic goods are said to exist, wherein even just a very small increase in the price of the good will make the quantity demanded drop to zero. Cross-Price Elasticity (with Substitutes and Complements) Whereas Elasticity of demand refers only to one product, Cross-Price Elasticity is a study of demand elasticity between two goods in the market. Cross-Price Elasticity refers to inter-relation of two goods in the market, looking into the effects that an increase in the price of Good A procures to the quantity demanded of Good B. If an increase in the price of Good A increases the quantity demanded of Good B, then the two goods are said to be Substitutes, where Good A could just substitute and replace Good B, and vice versa, for the consumer demand. However, should the increase in the price of Good A pulls down the quantity demanded for both products , then it can be said that the pair of goods is a Complements.