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Substitutes compete by meeting a similar need.
A substitute is a good or service that can be used in place of another. If one option becomes cheaper, some buyers may switch to it, reducing demand for the alternative when other influences remain unchanged.
How close the substitution is depends on the customer and the job. A bus trip and a taxi ride both provide transport, but they differ in timing, convenience and route. Identifying substitutes therefore requires more than putting products in the same category.
A reader may switch between a printed novel and its ebook for the same story, while still preferring print for a gift.
People can use both options; being substitutes does not mean two products are identical.
Principles of Economics 3e — Shifts in Demand and Supply for Goods and Services
OpenStax contributors · OpenStax, Rice University
CC BY 4.0. Rewritten as a self-contained explanation; the example and reflection are Vakataka additions. Written and edited with AI assistance. No source images reproduced.
Source edition: 2024-07-18T12:52:27Z
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