Cross-price elasticity measures how sensitive the quantity demanded for one product is to changes in the price of another related product. It helps determine if two goods are substitutes or complements.
Related terms
Income Elasticity: Income elasticity measures the responsiveness of demand for a good or service to changes in income. It indicates whether a good is normal (positive income elasticity) or inferior (negative income elasticity).
Substitutes: Substitute goods are products that can be used in place of each other. When the price of one substitute increases, the demand for the other substitute increases.
Complements: Complementary goods are products that are typically consumed together. When the price of one complement increases, the demand for the other complement decreases.