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Cross Price Elasticity of Demand – Meaning, Formula, Examples | How to Calculate? [Video]

Cross Price Elasticity of Demand – Meaning, Formula, Examples | How to Calculate?

In this video tutorial, we learn what is cross-price elasticity, its formula along with calculation examples and downloadable excel template.

๐–๐ก๐š๐ญ ๐ข๐ฌ ๐‚๐ซ๐จ๐ฌ๐ฌ ๐๐ซ๐ข๐œ๐ž ๐„๐ฅ๐š๐ฌ๐ญ๐ข๐œ๐ข๐ญ๐ฒ ๐จ๐Ÿ ๐ƒ๐ž๐ฆ๐š๐ง๐?
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Cross Price Elasticity of Demand measures price-to-demand relation i.e change in the quantity demanded by one product with a change in the price of the second product where, if both products are substitutes, it will show a positive cross elasticity of demand.

๐…๐จ๐ซ๐ฆ๐ฎ๐ฅ๐š
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The cross-price elasticity of demand is represented as follows,

Formula = (โˆ†QX/QX) รท (โˆ†PY/PY)

Further the formula is elaborated as follows,

Formula = (Q1X โ€“ Q0X) / (Q1X + Q0X) รท (P1Y โ€“ P0Y) / (P1Y + P0Y),

๐„๐ฑ๐š๐ฆ๐ฉ๐ฅ๐ž
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Let us take the simple example of gasoline and passenger vehicles. Now let us assume that a surge of 60% in gasoline price resulted in a decline in the purchase of passenger vehicles by 15%. Calculate the cross-price elasticity of demand in this case.

Given,

Percentage Change in Quantity of Passenger Vehicles =.-15%
Percentage Change in Price of Gasoline =60%

Using above formula we get,

= -15% /60%
= -25%

To know more about the ๐‚๐ซ๐จ๐ฌ๐ฌ ๐๐ซ๐ข๐œ๐ž ๐„๐ฅ๐š๐ฌ๐ญ๐ข๐œ๐ข๐ญ๐ฒ ๐จ๐Ÿ ๐ƒ๐ž๐ฆ๐š๐ง๐, you can go to this ๐ฅ๐ข๐ง๐ค ๐ก๐ž๐ซ๐ž:- https://www.wallstreetmojo.com/cross-price-elasticity-of-demand/

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Internal Rate of Return (IRR) | Formula | Calculation with Example [Video]

In this video on internal rate of return (irr), here we learn formula, example of irr along with significance and its drawbacks.๐–๐ก๐š๐ญ ๐ข๐ฌ ๐ˆ๐ง๐ญ๐ž๐ซ๐ง๐š๐ฅ ๐‘๐š๐ญ๐ž ๐จ๐Ÿ ๐‘๐ž๐ญ๐ฎ๐ซ๐ง (๐ˆ๐‘๐‘)?-------------------------------------------------------------------Internal return rate is the rate at which the net present value of the project is zero, the rate at which future cash flows are adjusted to calculate the present value.๐ˆ๐ง๐ญ๐ž๐ซ๐ง๐š๐ฅ ๐‘๐š๐ญ๐ž ๐จ๐Ÿ ๐‘๐ž๐ญ๐ฎ๐ซ๐ง (๐ˆ๐‘๐‘) ๐…๐จ๐ซ๐ฆ๐ฎ๐ฅ๐š-------------------------------------------------------------------NPV= 0= CF0 + CF1/(1+IRR)^1 + CF2/(1+IRR)^2 + ..... CFn/(1+IRR)^n๐’๐ญ๐ž๐ฉ๐ฌ ๐ญ๐จ ๐‚๐š๐ฅ๐œ๐ฎ๐ฅ๐š๐ญ๐ž ๐ˆ๐‘๐‘ ๐ข๐ง ๐„๐ฑ๐œ๐ž๐ฅ------------------------------------------------------#1 - Calculate Cash inflows and outflows in a standard format.#2 - Use the IRR formula in Excel#3 - Compare IRR to Discount Rate๐ˆ๐ง๐ญ๐ž๐ซ๐ง๐š๐ฅ ๐‘๐š๐ญ๐ž ๐จ๐Ÿ ๐‘๐ž๐ญ๐ฎ๐ซ๐ง (๐ˆ๐‘๐‘) ๐’๐ข๐ ๐ง๐ข๐Ÿ๐ข๐œ๐š๐ง๐œ๐ž-------------------------------------------------------------------------The IRR of any project shall be estimated taking into account the following three assumptions:1- The investments made are kept until the maturity dates.2 - The intermediate cash flows will reinvest itself in IRR.3 - By nature all cash flows are periodic, or the time gaps between various cash flows are equal.To know more about ๐ˆ๐ง๐ญ๐ž๐ซ๐ง๐š๐ฅ ๐‘๐š๐ญ๐ž ๐จ๐Ÿ ๐‘๐ž๐ญ๐ฎ๐ซ๐ง (๐ˆ๐‘๐‘), you can go to this ๐ฅ๐ข๐ง๐ค ๐ก๐ž๐ซ๐ž:- https://www.wallstreetmojo.com/internal-rate-of-return-irr/Subscribe to our channel to get new updated videos. Click the button above to subscribe or click on the link below to subscribe - https://www.youtube.com/channel/UChlNXSK2tC9SJ2Fhhb2kOUw?sub_confirmation=1