Finance Formulas / July 19, 2018 / Avalynn Orr
Cross Price Elasticity of Demand (XED) is the responsiveness of demand for one good to the change in the price of another good. It is the ratio of the percentage change in quantity demanded of good x to the change in the price of Good Y. In business, Cross Elasticity of Demand is important because it will help determine whether or not it is a good move to increase or decrease prices or to substitute one product for another for revenue.
As mentioned above, the CAC metric is important to two parties companies and investors. The first party includes outside, early stage investors who use it to analyze the scalability of new Internet technology companies. They can determine a company’s profitability by looking at the difference between how much money can be extracted from customers and the costs of extracting it.
We Also Think You’ll Like