Cross Elasticity Of Demand

Cross Elasticity Of Demand

Cross-elasticity of Demand, a measurement of the degree of responsiveness of the demand for one commodity to a change in the price of another. It is measured by dividing the proportionate change in the demand for the one commodity by the proportionate change in the price of the other. A high-valued measurement would indicate that the commodities were close substitutes; a low one would indicate that they were remote substitutes. 71

Cross-section Analysis, the study of a series of recordings of economic data for different individuals (or firms or countries) at the same, moment or in the same period of time. A method of investigation and research commonly used by economists. The best known examples. are censuses of population and production in many countries; in Britain the Ministry of Labour records the expenditure of a sample Of 3,000 households in two consecutive weeks every year; and so on. A cross-section analysis of household income and expenditure may reveal that households with different incomes allocate different proportions of it to food, housing, clothing, entertainment, holidays, insurance, saving, etc. It can then be deduced that if the income of a household rose it would probably distribute it in the same way as the avenge household with the higher income, or that if total income in a country rose spending or saving would change in the ways indicated by the habits of the higher income households. There is some confirmation of this tendency in recent years in the U.S.A. These deductions are not certainties that a priori probabilities depending on the assumption that no other changes that might affect spending and saving habits have taken place. Cross-section analysis can sometimes be checked by time series.

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