« “Supply-Sider?” | Main | Leading Economic Indicators »

July 17, 2008

Cross Price Elasticity of Demand

WOW… there’s a scary term. Sometimes I’m perplexed when students and most of the general public are intimidated by economic jargon, but terms like “Cross Price Elasticity of Demand” help me understand why.

So what is it? Well, it’s simply the degree to which the demand for one product can change in response to a change in price of another good.

Here’s an example: Gas prices are up. In response, demand for scooters is up an amazing 23.6% in the first quarter of 2008. The demand for scooters is responding very positively to the price of gas. That’s “Cross Price Elasticity of Demand,” a fairly simple concept with a somewhat confusing name.

So, is anyone planning to buy a scooter…or perhaps to invest in Honda instead of General Motors?

By: Wade Rousse

Posted by Wade at July 17, 2008 3:30 PM

Trackback Pings

TrackBack URL for this entry:


Purchased a 2nd hand scooter 2 weeks ago.
Gas certainly an issue, but equally, the urban legal perking problem.

Posted by: HM Osterhout at July 18, 2008 7:58 PM

Great explanation.
Incidentally, the latest fad on the University of Iowa campus is to ride a scooter to get around campus. So...is the scooter a need or a want? While, the trend has not been noticed on other Iowa campuses, I wonder if it's a national phenomena?

Posted by: joanne Kuster at July 24, 2008 7:20 PM

This is an interesting article. Thanks for sharing.

Posted by: Christian Louboutin at May 31, 2010 12:10 AM

Thanks very good for report, I follow your blog

Posted by: sunglasses shop at May 31, 2010 8:21 PM

I always inspired by you, your opinion and way of thinking, again, appreciate for this nice post.

- Murk

Posted by: Poker Test at September 30, 2010 4:56 AM

I am doing research for my college thesis, thanks for your great points, now I am acting on a sudden impulse.

- Laura

Posted by: Submit Form at October 5, 2010 2:36 PM

Post a comment

Commenting Policy:
All comments and links posted to FRBC blogs are reviewed. The Federal Reserve reserves the right to protect against spam, off-topic and profane comments and links; any such comments or links will be deleted and the domain address of the poster blocked.

Remember Me?

Please type the 6 digit security code as it appears below:

Please enter the security code you see here