BACHELOR OF BUSINESS ADMINISTRATION

Detailed explanation-1: -A substitute is a product or service that can be easily replaced with another by consumers. In economics, products are often substitutes if the demand for one product increases when the price of the other goes up.

Detailed explanation-2: -“Products that can satisfy some of the same customer needs as each other. Butter and margarine are classic examples of substitute goods.” If someone doesn’t have access to a car they can travel by bus or bicycle. Buses or bicycles, therefore, are substitute goods for cars.

Detailed explanation-3: -The Correct Answer is D. Tea and Coffee are considered substitutes goods because when the price of tea rises, people will be less willing to consume tea and look for its substitutes. In that case, people will switch to coffee which is less expensive to consume. Hence, these goods are considered substitutes.

Detailed explanation-4: -There are two types of substitute goods: indirect and direct. A direct substitute is whereby two products can be readily exchanged for one another. Think of Pepsi and Cola. By contrast, an indirect substitute is where two goods can still be replaced by one another, but have a weak correlation.