Price Elasticity of Demand

Price Elasticity of Demand

A coefficient that represents the relationship between a chance in price and any consequential change in demand.

Expressed as:

$$E=\frac{\Delta Q}{\Delta P}$$

Cross Price Elasticity of Demand

Similar to price elasticity of demand, but represents the change in quantity of an alternative or substitute product as a consequence of change in price of another.

Expressed as

$$E_{xy}=\frac{\Delta Qx}{\Delta Py}\times \frac{Py}{Qx}$$

Investopedia Reference

For example, an increased price in my product portfolio might result in my customer choosing to buy a competitor product, or a slightly cheaper product of my own (cannibalisation).