Economics Supply And Demand Questions Medium
A substitute good is a product that can be used as an alternative to another product for fulfilling a similar need or want. When the price of a substitute good increases, the demand for the original product also increases, as consumers switch to the cheaper alternative. For example, if the price of coffee increases, some consumers may switch to tea as a substitute.
On the other hand, a complementary good is a product that is used together with another product. The demand for a complementary good is directly related to the demand for the main product. When the price of a complementary good increases, the demand for the main product decreases, and vice versa. For instance, if the price of gasoline increases, the demand for cars may decrease as people find it more expensive to operate them.
In summary, the key difference between substitute goods and complementary goods lies in their relationship with other products. Substitute goods can be used interchangeably, while complementary goods are used together. Changes in the price or demand of one product will have opposite effects on the demand for substitute goods and complementary goods.