Substitute Goods Cross-Price Demand
Coffee (Good A)
Tea (Good B)
Price of Good A
100
Coffee Price
Demand for Good B
100
Tea Quantity
Cross-Price Relationship
Substitutes
Direct Effect
Price: 100
Price of Good A
100
Coffee Price
Demand for Good B
100
Tea Quantity
Cross-Price Relationship
Substitutes
Direct Effect
Cross-Price Elasticity Analysis
1. Effect on Good A (Law of Demand)
P_A = 100 → Q_A = 100
2. Effect on Substitute Good B
Demand D_B shifts to Q_B = 100
3. Cross-Price Elasticity of Demand (XED)
XED = %ΔQ_B / %ΔP_A > 0 (Positive)
4. Economic Principle
As P_A increases, consumers switch to Good B.