the cross-price elasticity of demand is the percentage change in the quantity of good A that is demanded as a

result of a percentage change in the price of good B.

Substitute goods have positive cross-price elasticities of demand: if good A is a substitute for good B, like coffee

and tea, then a higher price for B will mean a greater quantity consumed of A. Complement goods have

negative cross-price elasticities: if good A is a complement for good B, like coffee and sugar, then a higher price

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5.4 • Elasticity in Areas Other Than Price 129

for B will mean a lower quantity consumed of A.

Elasticity in Labor and Financial Capital Markets

The concept of elasticity applies to any market, not just markets for goods and services. In the labor market,

for example, the wage elasticity of labor supply—that is, the percentage change in hours worked divided by

the percentage change in wages—will reflect the shape of the labor supply curve. Specifically:
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