What are Substitute Goods?
The goods which can be used in place of one another to satisfy a specific want, like tea and coffee are known as Substitute Goods. The price of substitute goods directly affects the demand for a given commodity. For example, if the price of a substitute good (say, coffee) increases, then demand for the given commodity (say, tea) will increase as compared to coffee.
In the above graph, the price of the substitute good (coffee) is shown on the Y-axis, and demand for the given commodity (tea) is shown on X-axis. When there is an increase in the price of coffee from OP to OP1, then the demand for tea will also increase from OQ to OQ1.
Difference between Substitute Goods and Complementary Goods
Substitute Goods and Complementary Goods are two types of goods with different effects of price change on the demand of the commodity.
Table of Content
- What are Substitute Goods?
- What are Complementary Goods?
- Difference between Substitute Goods and Complementary Goods
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