If the price of coffee rises and tea sales go up, tea and coffee are substitutes (positive elasticity). If printer prices rise and ink sales fall, they are complements (negative).
How to use the Cross Price Elasticity Calculator
- Initial quantity of good A
- Final quantity of good A
- Initial price of good B
- Final price of good B
Results update as you type, and every field accepts the units shown in its menu.
How it works
Enter the initial and final quantity of good A and the initial and final price of good B.
Tips
- Use consistent periods (a year or a quarter) for flow figures and period-end values for balances.
- Average opening and closing balances when a ratio mixes a flow with a stock.
- Benchmark against competitors in the same industry.
- Read the ratio together with others – profitability, liquidity and efficiency tell different stories.
Common mistakes to avoid
- Using sales instead of cost of goods sold for inventory ratios.
- Mixing gross, operating and net profit.
- Ignoring one-off items that distort a single year.
Inputs explained
| Field | What to enter |
|---|---|
| Initial quantity of good A | A number |
| Final quantity of good A | A number |
| Initial price of good B | Amount in your currency |
| Final price of good B | Amount in your currency |
What each result means
- Percentage change in quantity (midpoint) = ([Final quantity of good A] – [Initial quantity of good A])÷(([Final quantity of good A] + [Initial quantity of good A])÷2)×100
- Percentage change in price/income (midpoint) = ([Final price of good B] – [Initial price of good B])÷(([Final price of good B] + [Initial price of good B])÷2)×100
- Cross price elasticity = [Percentage change in quantity (midpoint)]÷[Percentage change in price÷income (midpoint)]
Example values
How the main result changes when Initial quantity of good A changes and everything else stays at the example values above:
| Initial quantity of good A | Cross price elasticity |
|---|---|
| 500 | 3.545 |
| 750 | 1.895 |
| 1,000 | 0.628 |
| 1,250 | -0.375 |
| 1,500 | -1.189 |
| 2,000 | -2.429 |
Formula
Cross elasticity = % change in quantity of good A ÷ % change in price of good BMidpoint % change = (new − old) ÷ ((new + old) ÷ 2)Positive = substitutes, negative = complements, ~0 = unrelatedWorked example
Inputs — Initial quantity of good A: 1,000; Final quantity of good A: 1,150; Initial price of good B: $4; Final price of good B: $5.
Results — Percentage change in quantity (midpoint) = 13.95 %; Percentage change in price/income (midpoint) = 22.22 %; Cross price elasticity = 0.628; Relationship = Substitutes.
Frequently asked questions
What does positive cross price elasticity mean?
The goods are substitutes.
What does negative cross price elasticity mean?
The goods are complements.
Why use the midpoint method?
It gives the same result whether price rises or falls.
What formula does the Cross Price Elasticity Calculator use?
Cross elasticity = % change in quantity of good A ÷ % change in price of good B.