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| - | What are Substitute Goods | + | ====== Substitute Goods ====== |
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| + | ===== What are Substitute Goods? ===== | ||
| Substitute Goods are those goods that can be used to satisfy the same necessity. Substitute goods have positive cross elasticity of demand. | Substitute Goods are those goods that can be used to satisfy the same necessity. Substitute goods have positive cross elasticity of demand. | ||
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| {{:en:subsitute-goods-example.png?nolink|}} | {{:en:subsitute-goods-example.png?nolink|}} | ||
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| + | For example, butter and margarine can be used to satisfy the same need. Although, some people will prefer one over the other. In this case, butter and margarine are **close** but not perfect substitutes. | ||
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| + | **Perfect substitutes** have a cross elasticity that trends to positive infinity. If the price of one increase more than the price of the other, consumers will buy only the cheaper. | ||
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| + | Examples of perfect substitute goods are two one-dollar bills or different soybeans of the same quality. | ||
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