Question
I am getting stuck or second-guessing on how to tell if something is a complement or substitute based on the price elasticity of demand. Looking
I am getting stuck or second-guessing on how to tell if something is a complement or substitute based on the price elasticity of demand.
Looking at the price of elasticity of demand below, how do I know if something is complementary vs substitute? So I know if it is positive, it's a substitute versus if it's negative, is a compliment. But is it based on absolute value?
For example Organice milk vs Non organic milk -> |-1.78| - |-1.02| = 0.76 Positive so they are substitutes
And looking at this together, the higher cross-price elasticity between Almond milk vs non-organic or Almond milk versus Organic would be between Almond milk and non-organic milk. correct?
Organic Milk -1.78
Non-organic Milk -1.02
Almond Milk -2.82
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