Cross demand refers to the various amounts of other goods which will be purchased at various prices when the price of a certain goods increases or decreases. These related goods are either substitutes or complementary goods. If they are substitutes, then obviously they satisfy the same want. The more the consumer buys of one, the less he requires the other. For example, tea and coffee are good substitutes. If the price of tea rises, the consumers may buy less of it. Thus, a rise in the price of tea increases the demand for coffee.
A fall in the price of tea, on the contrary, may reduce the demand for coffee because the consumer will now increase his intake of tea. Thus, a change in price of tea effects the demand for coffee. On the contrary, if both the commodities are jointly demanded to satisfy the same want they may be said to be complementary. For example, bread and butter are complementary goods. A fall in the price of bread will increase the demand for butter and vice-versa.
