Cross Price Elasticity Question?
So i'm a little confused as to how to approach this problem:
Define the cross price elasticity of good i with respect to the price of good j as
Eij = ( d(xi) / d(pj) ) * ( pj/xi ).
Would this just be d(xi)/xi = d(pj)/pj or am I doing something completely wrong?
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So it should be dXi/dPj x Pj/Xi. The first term is a slope of the curve. But if you know the %change of X and P, your formula is correct.