What Happens to Demand When the Price of a Substitute Good Decreases?

When the price of a substitute good decreases, the quantity demanded of the other good increases. Here's why:

Substitute goods are products or services that consumers see as interchangeable or comparable. They serve similar purposes or satisfy similar needs. For example, tea and coffee, butter and margarine, or Coke and Pepsi are all considered substitutes.

When the price of one substitute good decreases, it becomes more attractive to consumers. This leads to an increase in the quantity demanded of the more affordable substitute. Since consumers are now buying more of the cheaper option, they are likely to buy less of the other substitute, even if its price hasn't changed.

Key Takeaway: A decrease in the price of one substitute good leads to an increase in the quantity demanded of that good and typically a decrease in demand for the other substitute.