What do you mean by substitutes? Give examples of two goods which are substitutes of each other.

Substitute goods means the goods that can replace the other like tea and coffee. If the price for tea will increase (no change in price of coffee), the demand for tea will decrease and people will substitute coffee for tea. Therefore we can say that demand for substitute goods move in the same direction with price. If the price of a commodity increases the demand for it substitute will also increase.




At price P, the quantity demanded of coffee is Q, when the price of tea increases the quantity demanded of coffee is increased Q2. When the price of tea decreases the quantity demanded of coffee is decreased to Q1.



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