Rachel is hosting the neighborhood barbecue party at her house and decides to grill hotdogs. Last year, a package of hotdog buns costed $7 and a package of hotdogs costed $10 and Rachel had bought 15 packages of buns and 15 packages of hotdogs at that time.
Now the price of buns has increased to $8 a package, and the price of hotdogs remained at $10. Rachel decides she will only buy 10 packages of hotdogs this year.
Using the mid-point formula, the cross-price elasticity is and the goods are .Rachel is hosting the neighborhood barbecue party at her house and decides to grill hotdogs. Last year, a package of hotdog buns costed $7 and a package of hotdogs costed $10 and Rachel had bought 15 packages of buns and 15 packages of hotdogs at that time.
Now the price of buns has increased to $8 a package, and the price of hotdogs remained at $10. Rachel decides she will only buy 10 packages of hotdogs this year.
Using the mid-point formula, the cross-price elasticity is and the goods are .

Cross-price elasticity measures how sensitive a product's demand is to a change in a corresponding product price. Some goods in the market can frequently be related to one another. This could imply that an increase or decrease in the price of one product can have an impact on the demand for another. The cross elasticity of demand is an economic concept that measures how responsive one good's demand is when the price of another good changes. This measurement, also known as cross-price elasticity of demand, is calculated by dividing the percentage change in the quantity demanded of one good by the percentage change in the price of the other good. The cross elasticity of demand in economics refers to how sensitive demand for one product is to changes in the price of another.

Companies use the cross elasticity of demand to set prices for their goods. Because there is no cross-elasticity of demand to consider, products with no substitutes can be sold at higher prices. The cross elasticity of demand is used to strategically price complementary goods. Cross elasticity of demand assesses the relationship between two products when one of their prices changes. It depicts the relative change in demand for one product as the price of another increases or decreases.

What are Complementary Goods?

A complementary good is a good whose appeal grows in proportion to the popularity of its complement. It has a negative cross elasticity of demand, which means that demand for it rises when the price of another good falls.

When two goods are complementary, they experience joint demand, which means that the demand for one good is linked to the demand for the other. As a result, if a greater quantity of one good is demanded, a greater quantity of the other will be demanded, and vice versa. For example, the demand for razor blades may be affected by the number of razors in use; this is why razors are sometimes sold as loss leaders in order to boost demand for the associated blades. Another example is when a toothbrush is given away free with toothpaste.

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