Cross-Price Elasticity

Cross-price elasticity measures how the quantity demanded of one good changes in response to a price change in another good. Specifically, if two products are substitutes (like coffee and tea), an increase in the price of one typically leads to an increase in demand for the other. Conversely, if they are complementary goods (like printers and ink), an increase in the price of one usually leads to a decrease in demand for the other. Essentially, it helps understand the relationship between different products based on consumer behavior when prices fluctuate.