What is Substitute good?
In [[economics]] two or more [[goods]] can be classified by looking at the [[demand curve]] when the [[price]] of one of these goods changes. That way they will either be classified as substitutes or [[complementary good]]s. Two goods are substitutes if the demand of one good increases and the [[price]] of the other good increases. In this case, [[consumer]]s will replace one good with the other. Classic examples of substitute goods include [[margarine]] and [[butter]], or [[tea]] and [[coffee]]. Substitute goods not only occur on the consumer side of the [[market]] but also the producer side. Substitutable producer goods would include: [[petroleum]] and [[natural gas]] (used for heating or [[electricity]]). The fact that one good is substitutable for another has immediate economic consequences: insofar as one good can be substituted for another, the [[demand]] for the two kinds of good will be bound together by the fact that customers can trade off one good for the other if they get an advantage by to do so. '''Perfect substitutes''' can replace each other, without trade-off in costs, or [[quality]]. For '''imperfect substitutes''', the customer has to make a trade-off, either in price, or in quality. [[Artificial leather]] is much cheaper than real [[leather]], and can replace it in many situations - artificial and real leather are substitute goods. Real leather is much more durable, and has a different look and feel. When these factors are important, the two are not interchangeable. For this reason artificial and real leather are imperfect substitutes. [[Category:Microeconomics]] [[Category:Goods]] {{stub}}