The table below shows the estimated cross-price elasticities of demand (XEDXEDXED) for a subscription streaming service, Good XXX, with respect to the prices of four other digital services, WWW, YYY, ZZZ, and VVV.
| Digital Service | Cross-price elasticity of demand (XEDXEDXED) of Good X X\,X with respect to the price of this service |
|---|---|
| Service WWW | +1.50 |
| Service YYY | -0.65 |
| Service ZZZ | 0.00 |
| Service VVV | +0.40 |
From this table, it can be concluded that
a fall in the price of Service YYY will cause a decrease in the demand for Service XXX.
Service XXX and Service WWW are complementary goods, whereas Service XXX and Service YYY are substitutes.
a 10%10\%10% increase in the price of Service VVV will lead to a 4%4\%4% increase in the quantity demanded of Service XXX.
Service XXX is an inferior good because its cross-price elasticity of demand with respect to Service YYY is negative.
256 exam-style questions on AQA A Level Economics 1.3 Price determination in a competitive market, covering 1.3.1 The determinants of the demand for goods and services, 1.3.2 Price, income and cross elasticities of demand, 1.3.3 The determinants of the supply of goods and services, 1.3.4 Price elasticity of supply, 1.3.5 The determination of equilibrium market prices, and 1.3.6 The interrelationship between markets. Each one has a worked solution and a mark scheme showing where the marks go.