If the cross-price elasticity of demand between two goods is positive, what can be inferred about the nature of the relationship between these goods, and how might this impact market dynamics if the demand for one good becomes unit elastic?

If the cross-price elasticity of demand between two goods is positive, it means that when the price of one good increases, the demand for the other good also increases. This suggests that the two goods are substitutes, meaning that consumers can replace one with the other. For example, if the price of coffee goes up, people might buy more tea instead, showing how these products compete with each other. If the demand for one of these goods becomes unit elastic, it means that the percentage change in quantity demanded is equal to the percentage change in price, which could lead to significant shifts in market dynamics. As the price of the first good rises, the increased demand for the substitute could lead to higher prices and profits for that good, affecting both producers and consumers in the market.