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Questions and Answers
Which of the following best describes substitute goods?
Which of the following best describes substitute goods?
- Goods or services that can be used instead of other goods or services, causing a change in demand. (correct)
- Goods or services that are only used in emergencies.
- Goods or services that are only available in limited quantities.
- Goods or services that are always more expensive than other goods or services.
What effect do substitute goods have on demand?
What effect do substitute goods have on demand?
- Create demand
- No effect on demand
- Decrease demand (correct)
- Increase demand
Which of the following is NOT a characteristic of substitute goods?
Which of the following is NOT a characteristic of substitute goods?
- They can be used instead of other goods or services.
- They are always more expensive than other goods or services. (correct)
- They are alternatives to the original goods or services.
- They cause a change in demand.
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Study Notes
Substitute Goods
- Substitute goods are products that can be used in place of each other to satisfy a particular need or want
- Examples of substitute goods include Coca-Cola and Pepsi, or Apple iPhone and Samsung smartphone
Effect on Demand
- An increase in the price of one substitute good leads to an increase in demand for the other substitute good
- This is because consumers will switch to the cheaper substitute good when the price of their preferred good increases
Characteristics of Substitute Goods
- Not a characteristic of substitute goods: perfect substitutes, as substitute goods are not identical but can be used as alternatives
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