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Explain what is meant by cross price and elasticity of demand and indicate how this might be measured .discuss. how understanding of cross price elaticity of demand would be usefull to identify firm producing wine. Elasticity is the ratio of the percentage change in quantity. There are three types of elasticity of demand (perfectly inelastic, inelastic and elastic) demand curves. If the quantity demanded remains constant when the price changes, then the elasticity of demand is zero and demand is said to be perfectly inelastic. On other hand if the percentage of quantity demanded is less then the percentage change in price, then the magnitude of the elasticity of demand is between zero and one and demand is said to be inelastic. Where as if the change of quantity demanded exceeds the percentage change in price, then the magnitude of elasticity is greater then 1 then demand will be elastic. Elasticity of demand is usually influenced by three crucial factors and these main factors are: · The closeness of substitutes · The proportion of income spent on the good · The time elapsed since a price change The closer the substitutes for a good or services, the more elastic is the demand for it. For example, hous