A positive cross-price elasticity between two goods implies that the two goods are compliments.

Question

Quizplus · Accepted Answer

A positive cross-price elasticity between two goods implies that they are substitutes, not complements. Complements have a negative cross-price elasticity as the demand for one good is closely tied to the demand for the other. Substitutes have a positive cross-price elasticity as the demand for one good increases when the price of a related good increases.

A Positive Cross-Price Elasticity Between Two Goods Implies That the Two