page_title: Substitute good
section_title: Introduction
hierarchical_section_title: Substitute good / Introduction
caption_attribution_description: English: Graph depicting the supply and demand for susbstitute goods
context_page_description: In microeconomics, a substitute good is a good that can be used in place of another. In consumer theory, substitute goods or substitutes are goods that a consumer perceives as similar or comparable, so that having more of one good causes the consumer to desire less of the other good. Formally, good is a substitute for good if, when the price of rises, the demand for rises. Let be the price of good. Then, is a substitute for if
  .
  Potatoes from different farms are an example: if the price of one farm's potatoes goes up, then fewer people will buy potatoes from that farm; they will buy potatoes from another farm instead. Other examples of substitute goods include margarine and butter, tea and coffee, and beer and wine.
  All goods sold within a perfect competition market structure are substitute goods.
context_section_description: Informally, substitute goods – as contrasted with complementary goods and independent goods – are goods that, as a result of changed conditions, may replace each other in use (or consumption). The fact that one good is substitutable for another has immediate economic consequences: insofar as one good can be substituted for another, the demands for the two goods will be interrelated by the fact that customers can trade off one good for the other if it becomes advantageous to do so. That is, an increase in the price of a good will (ceteris paribus) increase demand for its substitutes. Conversely, a decrease in the price of a good will decrease demand for its substitutes. More formally, the relationship between demand schedules determines whether goods are classified as substitutes or complements. A substitute good is a good with a positive cross elasticity of demand. This means that, if good  is a substitute for good , an increase in the price of  will result in a leftward movement along the demand curve of  and cause the demand curve for  to shift out. A decrease in the price of  will result in a rightward movement along the demand curve of  and cause the demand curve for  to shift in.
caption: Graphical example of substitute goods
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