What is a substitute good?

A substitute good is one that can replace another good in consumption. This means that if the price of one good rises, consumers may choose to purchase the substitute instead, thus fulfilling similar needs or desires. For example, if the price of butter increases, people might opt for margarine as a substitute. The existence of substitute goods is crucial in understanding market dynamics, as they provide consumers with alternatives and influence price elasticity.

The options related to fixed prices or complementarity do not define substitute goods accurately. A good that has no substitutes available refers more to unique products, while complementary goods are those that are often used together, not in place of one another. These concepts highlight the significance of substitutes in consumer choice and market behavior.