Explain how the sign of cross-price elasticity can help a manager distinguish substitutes from complements.

### What a good answer covers - Cross-price elasticity measures the responsiveness of demand for good X to a change in the price of good Y. - A positive sign indicates a substitute relationship in the note's framework. - A negative sign indicates a complementary relationship. - Managers can use this information when evaluating product combinations or competing products. ### The concept Substitutes can serve a similar purpose, so a price increase for one may shift buyers toward the other. Complements are used together, so a price increase for one can reduce demand for its partner. The sign indicates the direction of the relationship; it does not by itself state the size of the response. ### Terms - **Cross-price elasticity**: the percentage responsiveness of demand for one good to a percentage change in another good's price. ### Remember Positive suggests substitutes; negative suggests complements.