Substitute Good Relationship
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A Substitute Good Relationship is an economic substitute relationship between economic goods with a positive cross elasticity of demand.
- Example(s):
- between butter and margarine.
- between beef and poultry.
- …
- Counter-Example(s):
- Complementary Good, e.g. between entertainment and food.
- See: Consumer Theory, Marginal Rate of Substitution.
References
2016
- (Wikipedia, 2016) ⇒ http://en.wikipedia.org/wiki/substitute_good Retrieved:2016-1-5.
- In consumer theory, substitute goods or substitutes are products that a consumer perceives as similar or comparable, so that having more of one product makes them desire less of the other product. Formally, X and Y are substitutes if, when the price of X rises, the demand for Y rises.
Potatoes from different farms are an example: if the price of one farm's potatoes goes up, then it can be presumed that fewer people will buy potatoes from that farm and source them from another farm instead.
There are different degrees of substitutability. For example, a car and a bicycle may substitute to some extent: if the price of motor fuel increases considerably, one may expect that some people will switch to bicycles.
- In consumer theory, substitute goods or substitutes are products that a consumer perceives as similar or comparable, so that having more of one product makes them desire less of the other product. Formally, X and Y are substitutes if, when the price of X rises, the demand for Y rises.