6th October 2019


What is a substitute good?

Substitute goods are goods which, as a result of changed conditions, may replace each other in use (or consumption). A substitute good, in contrast to a complementary good, is a good with a positive cross elasticity of demand. Conversely, the demand for a good is decreased when the price of another good is decreased.

Also to know is, what is a complement and substitute?

In economics, a complementary good or complement is a good with a negative cross elasticity of demand, in contrast to a substitute good. This means a good's demand is increased when the price of another good is decreased.

What is complementary and substitute goods?

For example, the demand for one good (printers) generates demand for the other (ink cartridges). If the price of one good falls and people buy more of it, they will usually buy more of the complementary good also, whether or not its price also falls. In economics, you may often hear about substitute goods.

What is an example of a substitute good?

Examples of substitute goods include margarine and butter, tea and coffee, beer and wine. Substitute goods not only occur on the consumer side of the market but also the producer side. Substitutable producer goods would include: petroleum and natural gas (used for heating or electricity).
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