What can be expected about the cross-price elasticity of demand between dress shirts and ties?

The cross-price elasticity of demand measures how the quantity demanded of one good responds to a change in the price of another good. In the case of dress shirts and ties, these two items are often considered complementary goods. This means that if the price of dress shirts rises, the quantity demanded for ties would likely decrease, as consumers typically buy both items together for a coordinated look.

When two goods are complements, the cross-price elasticity of demand is negative. This indicates that an increase in the price of one good results in a decrease in the quantity demanded for the other good. In this scenario, it is reasonable to expect that when dress shirts become more expensive, fewer ties will be sold, demonstrating the complementary relationship between the two goods.

Understanding this relationship is important in economics, as it helps to analyze consumer behavior and the interconnectedness of different products within the market.