Which goods have a positive cross-price elasticity?

Cross-price elasticity of demand measures how the quantity demanded of one good responds to a change in the price of another good. A positive cross-price elasticity indicates that the two goods are substitutes. When the price of one good increases, consumers switch to the other, similar good, thus increasing its quantity demanded. For example, if the price of coffee rises, the demand for tea (a substitute) will increase, resulting in a positive cross-price elasticity.

A. Complements: These have a negative cross-price elasticity because an increase in the price of one good leads to a decrease in the demand for the other.

B. Normal goods: This term relates to income elasticity of demand, not cross-price elasticity. Demand for normal goods increases as consumer income rises.

D. Shortage goods: This is not a standard economic classification related to elasticity. A shortage occurs when quantity demanded exceeds quantity supplied at a given price.

1. Mankiw, N. G. (2021). Principles of Economics (9th ed.). Cengage Learning. Chapter 5, Section 5-2, "The Cross-Price Elasticity of Demand." The text states, "The cross-price elasticity is positive or negative depending on whether the goods are substitutes or complements... Substitutes are goods that are typically used in place of one another... Because the price of hot dogs and the quantity of hamburgers demanded move in the same direction, the cross-price elasticity is positive."

2. Krugman, P., & Wells, R. (2018). Microeconomics (5th ed.). Worth Publishers. Chapter 6, "Elasticity." The section on cross-price elasticity explicitly defines a positive value as indicating substitute goods.