Substantial practical value, Microeconomics

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The cross elasticity of demand calculates the responsiveness of the quantity demanded of one product to alters in the price of another product.  For example, the quantity demanded of Coca-Cola to alters in the price of Pepsi.  Cross elasticity of demand gives an indication of how close a substitute or complement one commodity is for another.  This concept has substantial practical value in formulating marketing strategies for most products.


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