LPG Shortage rumors lead to Electric Stove Shortage!?— Cross Elasticity of demand Explained #economy

1. 👩🏻‍🏫 Join Unacademy Prelims + Mains Program: https://unacademy.com/goal/upsc-civil-services-examination-ias-preparation/KSCGY/subscribe?plan_type=plus&referral_code=mrunal.org 2. 👩🏻‍🏫 Mrunal's Annual Economy Current Affairs lecture series Win26- next Free Live stream class on Wednesday https://unacademy.com/@mrunal.org/special-classes?type=latest 4. 📘 Amazon pe Mrunal's Economy Book: https://amzn.to/3Jb5rf7 5. 📆 Free Annual economy updates Win25: Mrunal.org/win25 6. 💾 Free Download the topicwise PYQ paperset, monthly current affairs magazine, & more from https://unacademy.com/content/upsc/downloads/ In this video, Dr. Mrunal Patel — UPSC Economy Expert and Senior Vice President at Unacademy — explains Cross Elasticity of Demand using real, relatable examples including the LPG shortage rumour that recently went viral across India, directly linking economic theory to live current affairs. WHAT IS PRICE ELASTICITY OF DEMAND? Before jumping into Cross Elasticity, Dr. Mrunal revisits the base concept: Price Elasticity of Demand. When the price of a good rises, its demand typically falls. But by how much? That depends on the nature of the commodity. Ice cream, being non-essential, sees a sharp drop in demand when prices rise — its elasticity is high. Tobacco products like Vimal Gutka, on the other hand, show very low price elasticity — demand barely budges even if the price doubles, because for habitual consumers, it is practically a necessity. Different goods have different elasticity depending on their nature and availability of substitutes. CROSS ELASTICITY OF DEMAND — POSITIVE TYPE Cross Elasticity of Demand refers to how the demand for one good changes when the price of another good changes. When Tea becomes expensive, people shift to Coffee — so demand for Coffee rises. This is Positive Cross Elasticity of Demand, because the two goods are substitutes for each other. This same principle became headline news when rumours of an LPG gas shortage spread across India. People immediately started panic-buying electric induction plates and electric hot plates as substitutes for their LPG-dependent cooking. Dr. Mrunal checked Amazon before recording this video — multiple brands of induction cooktops were temporarily out of stock due to sudden high demand. A perfect real-world demonstration of Positive Cross Elasticity in action. EFFICIENT MARKET HYPOTHESIS — BONUS CONCEPT Dr. Mrunal briefly explains why you cannot profit from such situations by buying stocks of induction plate manufacturers after the news breaks. The Efficient Market Hypothesis states that all publicly known positive and negative developments related to a company are already priced into its stock. By the time you hear the news, the big investors have already bought and driven the price up. CROSS ELASTICITY OF DEMAND — NEGATIVE TYPE When Bread becomes more expensive, people not only buy less Bread — they also buy less Amul Butter, because Bread and Butter are complementary goods consumed together. This is Negative Cross Elasticity of Demand. When the price of one good rises, the demand for its complement falls. CROSS ELASTICITY OF DEMAND — ZERO TYPE If the price of iPhone rises, does the demand for Vimal Gutka change? Absolutely not — these two goods have no relationship whatsoever. This is Zero Cross Elasticity of Demand. SUMMARY OF TYPES Positive Cross Elasticity: Substitute goods — Tea and Coffee, LPG and Induction Cooktops. When price of one rises, demand for the other rises. Negative Cross Elasticity: Complementary goods — Bread and Butter. When price of one rises, demand for the other falls. Zero Cross Elasticity: Unrelated goods — iPhone and Tobacco. No impact on each other's demand. EXAM RELEVANCE This topic appears in UPSC CSE Prelims, SSC CGL, State PSC, Banking, IBPS, RBI Grade B, CAPF, CDS, ACIO, APFC and related competitive exams. Cross Elasticity connects microeconomic theory directly to current economic events — which is increasingly how UPSC frames its MCQs and Mains questions. Understanding whether two goods are substitutes or complements, and the sign of their Cross Elasticity, is a frequently tested concept. **SEO TAGS** cross elasticity of demand, cross elasticity UPSC, price elasticity of demand, substitute goods economics, complementary goods economics, LPG shortage India economy, efficient market hypothesis, UPSC economy 2025 2026, Dr Mrunal Patel economy, Mrunal economy UPSC, Unacademy UPSC economy, SSC CGL economy, RBI Grade B economics, IBPS economy, UPSC prelims economy, microeconomics UPSC, demand elasticity explained, positive cross elasticity, negative cross elasticity, zero cross elasticity, induction cooktop LPG substitute, Mrunal.org economy, economic survey UPSC, UPSC current affairs economy