Which statement describes substitute goods?

Which statement describes substitute goods?

• A. A rise in the price of one good leads to an increase in the demand for the other good.
• B. A rise in the price of one good leads to a decrease in the demand for the other good.
• C. They are consumed together in a package.
• D. They are produced as joint products.

Answer: (A)

Substitute goods are items that can replace each other in consumption. When the price of one goes up, people switch to the cheaper alternative, so demand for the substitute increases. For example, if the price of coffee rises, many buy more tea. This substitution effect is why the other good’s demand rises as the first’s price increases. The other statements describe different relationships: goods consumed together are complements, not substitutes; joint production refers to how goods are produced rather than how their demand responds to price changes.

Substitute goods are items that can replace each other in consumption. When the price of one goes up, people switch to the cheaper alternative, so demand for the substitute increases. For example, if the price of coffee rises, many buy more tea. This substitution effect is why the other good’s demand rises as the first’s price increases. The other statements describe different relationships: goods consumed together are complements, not substitutes; joint production refers to how goods are produced rather than how their demand responds to price changes.