Increase in Price
An increase in price (ceteris paribus) will result in an increase in demand for its substitute goods. If two goods have a high substitutability, the change in demand will be much greater. Thus, economists can predict that a spike in the cost of a particular brand of detergent is likely to result in a large change in demand for other brands, whereas a change in the price of pencils will have a much smaller effect on the demand for pens. This is because most detergents are very similar, and thus have high substitutability, whereas pencils and pens are only partial substitutes - while they are sometimes interchangeable, many consumers prefer one over the other and there are some situations where only one is acceptable, such as pens on legal documents or pencils on most high-school maths homework. .
Read more about this topic: Substitute Good
Famous quotes containing the words increase in, increase and/or price:
“The increase in wisdom can be measured precisely by the decrease in bile.”
—Friedrich Nietzsche (1844–1900)
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