cross-elasticity of demand

Definition

Proportionate change in the demand for one item in response to a change in the price of another item. It is 'positive' where the two items are mutual substitutes, and any increase in the price of one (say butter) will increase the demand for the other (say margarine). It is 'negative' when the items are complementary and any increase in the price of one (say cars) will decrease the demand for the other (say tires). See also elasticity. Also called cross price elasticity.