ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -According to the Cambridge Dictionary, substitute goods are: “Products that can satisfy some of the same customer needs as each other. Butter and margarine are classic examples of substitute goods.”

Detailed explanation-2: -What Is a Substitute? A substitute, or substitutable good, in economics and consumer theory refers to a product or service that consumers see as essentially the same or similar-enough to another product. Put simply, a substitute is a good that can be used in place of another.

Detailed explanation-3: -Petrol and diesel as a pair of goods is an example of substitutes and other pairs are examples of complementary goods.

Detailed explanation-4: -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-5: -An example of substitute goods is Coca-Cola and Pepsi; the interchangeable aspect of these goods is due to the similarity of the purpose they serve, i.e fulfilling customers’ desire for a soft drink. These types of substitutes can be referred to as close substitutes.