Substitutes

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Updated: Aug 20, 2021

Two goods are substitutes if a rise in the price of one causes an increase in demand for the other. This substitute relationship arises because the goods perform a similar function or serve a similar taste. However, we can generally think of a whole spectrum of substitution possibilities for a particular good, and so we aften refer to ‘dose’ substitutes or ‘weak’ substitutes. For example, a Pepsi would be a dose substitute for a Coke, but a Martini would not. The doser are the available substitutes for a product, the greater, other things being equal, will be its price elasticity of demand.

Reference: The Penguin Dictionary of Economics, 3rd edt.



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James Knight
Editor of Education
James is the Editor of Education for Invezz, where he covers topics from across the financial world, from the stock market, to cryptocurrency, to macroeconomic markets.... read more.