Cross-elasticity measures:

**The reasoning** Cross-elasticity of demand measures how the quantity demanded of **one good** changes when the **price of another good** changes. This reveals the relationship between two different products. The formula: **Cross-elasticity = % change in quantity of Good A ÷ % change in price of Good B** - If **positive** → the goods are **substitutes** (when Pepsi's price rises, people buy more Coke) - If **negative** → the goods are **complements** (when petrol prices rise, people buy fewer cars) - If **zero** → unrelated goods (rice and shoes have no connection) So cross-elasticity specifically tells you whether goods are substitutes or complements. **Why the wrong options tempt you** **A) Same good** — That's regular price elasticity, not *cross*-elasticity. The word "cross" means it crosses between two different goods. **C) Time** — You're confusing this with how elasticity *changes* over time, but cross-elasticity measures product relationships, not time periods. **D) Income** — That's income elasticity, which shows how demand changes with consumer income. **Quick takeaway** "Cross" means crossing between two goods—it reveals if they're friends (complements) or rivals (substitutes).