Economics Elasticity Of Demand Questions Medium
A positive cross-price elasticity of demand indicates that two goods are substitutes. This means that an increase in the price of one good will lead to an increase in the demand for the other good. In other words, when the price of one good rises, consumers tend to switch to the other good as a substitute, resulting in an increase in the demand for the substitute good. Conversely, a decrease in the price of one good will lead to a decrease in the demand for the other good. This positive relationship between the prices of two goods and the demand for each other is a characteristic of substitute goods.