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Explain the Effect of Change in Price of Substitute on Demand of a Good. - Economics

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Explain the effect of change in price of substitute on demand of a good.

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Solution

Effect of change in price of substitute goods: When the price of one good falls, it becomes cheaper in relation to another similar good. As a result, one good is substituted for the other good (e.g. coffee and tea). On the other hand, when the price of one good increases, it becomes costlier in relation to another similar good.

Concept: Effects of Shifts in Demand and Supply
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