cross-price elasticity of demand (XED)

Cross-price elasticity of demand measures the responsiveness of demand for one good to a change in the price of a different good. It is calculated as the percentage change in demand for one good divided by the percentage change in the price of the other good. The XED reflects the strength of the relationship between two goods, showing the degree to which changes in the price of one good will affect the demand for the other. For example, if the price of milk increases and the demand for cheese decreases, then the XED between milk and cheese would be negative.