Cross Elasticity of Demand

Cross elasticity of demand ($E_c$) measures how the quantity demanded of one good ($x$) responds to a change in the price of a related good ($y$), the price of $x$ itself remaining constant:

• $E_c > 0$ (positive) — the goods are substitutes (e.g., tea and coffee): a rise in the price of one raises demand for the other.
• $E_c < 0$ (negative) — the goods are complements (e.g., car and petrol): a rise in the price of one lowers demand for the other, since they are used together. …