ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -A decrease in the price of substitute goods leads to an decrease in the demand for given commodity and vice versa. Eg., if price of a substitute good (say coffee) decreases, then demand for given commodity (say tea) will fall, so demand for a given commodity is directly affected by change in price of substitute goods.

Detailed explanation-2: -The substitution effect refers to the change in demand for a good as a result of a change in the relative price of the good compared to that of other substitute goods. For example, when the price of a good rises, it becomes more expensive relative to other goods in the market.

Detailed explanation-3: -The demand for a good increases, if the price of one of its substitutes rises. The demand for a good decreases, if the price of one of its substitutes falls.

Detailed explanation-4: -An increase in the number of available substitutes for a commodity will decrease the price elasticity of demand for the commodity. The long-run price elasticity of demand for a commodity is generally greater then the short-run price elasticity of demand for the commodity.