If the cross-price elasticity of demand between two goods X and Y is positive, what does it indicate about the relationship between the two goods?

When the cross-price elasticity of demand between two goods X and Y is positive, it means that these two goods are substitutes for each other. This implies that if the price of good Y increases, consumers will buy more of good X because they see it as a replacement for Y. For example, if the price of coffee goes up, people might start buying more tea instead, since both are beverages that can serve a similar purpose. This relationship is important for businesses to understand, as changes in pricing can directly affect their sales based on how consumers react to prices of related products. Therefore, a positive cross-price elasticity shows that the demand for one good increases when the price of the other good rises.