Which term describes products that can be used as alternatives to one another in consumption?

Which term describes products that can be used as alternatives to one another in consumption?

• A. Substitutes
• B. Complements
• C. Inferior goods
• D. Normal goods

Answer: (A)

Substitutes are products that can be used as alternatives to each other in consumption. When the price of one good rises, people often switch to the other cheaper substitute, increasing its demand (positive cross-price elasticity of demand). This is why tea and coffee, or butter and margarine, are classic examples of substitutes. Complements, on the other hand, are goods that are often used together, so their demands rise together. Inferior goods are those whose demand falls as income rises, while normal goods see higher demand as income increases.

Substitutes are products that can be used as alternatives to each other in consumption. When the price of one good rises, people often switch to the other cheaper substitute, increasing its demand (positive cross-price elasticity of demand). This is why tea and coffee, or butter and margarine, are classic examples of substitutes.

Complements, on the other hand, are goods that are often used together, so their demands rise together. Inferior goods are those whose demand falls as income rises, while normal goods see higher demand as income increases.