Cross-elasticity measures demand responsiveness to another good's price change

Steps:

• Recall cross-elasticity of demand (XED) formula: % change in quantity demanded of good X / % change in price of good Y.
• Identify it applies to related goods like substitutes (positive XED) or complements (negative XED).
• Evaluate choices: A mentions income, which relates to income elasticity; B fits XED directly for complements.
• Eliminate unrelated options: C and D focus on price changes, not demand responsiveness.

Why B is correct:

• Cross-elasticity of demand is defined as the percentage change in demand for one good divided by the percentage change in price of another good, directly measuring response to a complement's price change.

Why the others are wrong:

• A: Measures income effects, not cross-price effects; that's income elasticity.
• C: Describes supply-side price adjustments, not demand elasticity.
• D: Refers to general price-demand shifts, akin to own-price elasticity, not cross-effects.

Final answer: B