Substitutes
Definition. Substitutes are goods that satisfy a similar want and can be used in place of one another, so that a consumer can switch between them. A rise in the price of one good leads to a rise in the demand for its substitute, giving the two a positive cross price elasticity of demand.
The closer the substitutes, the larger and more positive the cross elasticity. Examples include competing brands or tea and coffee, where each can replace the other in consumption.
This term belongs to Income and Cross Elasticity of Demand in A Level Economics. Read the full chapter for the diagrams, worked examples and exam technique.
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