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Like the name suggests,..any good or service that can be used instead of another.
For example, bread is a substitute for pasta:) or coke is a substitute for pepsi. Different goods that, at least partly, satisfy the same needs of the consumers and, therefore, can be used to replace one another. Price of such goods shows positive cross-elasticity of demand. Thus, if the price of one goodgoes up the sales of the other rise, and vice versa. By the same token, a decrease in the price of the first good will result in a leftward shift of the entire demand schedule for its substitute, so that less of the substitute good will then be demanded at any given available price for ... An example of substitutable consumer goods might be compact disks and cassette tapes,
In the neoclassical broad culture, everything can be exchanged and substituted with everything. Consumer goods can substitute each other, although usually imperfectly. Everything can be bought, in the sense that whatever you have, it's always possible to find alternative consumption bundles that you would accept as equivalent to your own. Indirectly, money can buy everything. Quantities are the key variables: you accept to change your consumption habits in exchange for enough quantity of substitutes
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When does a firm have market power?
A firm is a monopoly if it is the sole seller of its product and if its product has no close substitutes.
Why is a item that has many close substitutes tend to have an elastic demand?
An item with many close substitutes tends to have elastic demand because consumers can easily switch to alternative products if the price of the item rises. This sensitivity to price changes means that even a small increase in price can lead to a significant drop in quantity demanded, as consumers opt for substitutes. Conversely, if the price decreases, the demand for the item may increase sharply as it becomes more attractive relative to its alternatives. Therefore, the presence of close substitutes increases the responsiveness of consumers to price changes.
Will products that are very important to us and that have no close substitutes have elastic or inelastic demand?
Products that are very important to us and have no close substitutes typically exhibit inelastic demand. This means that consumers will continue to purchase these products even if prices rise, as there are no alternatives available that can satisfy their needs. The necessity and lack of substitutes lead to a smaller change in quantity demanded in response to price changes.
Does a pure monopoly have substitutes?
A pure monopoly typically has no close substitutes for its product or service, which allows it to exert significant control over pricing and supply in the market. This lack of substitutes is a defining characteristic, as consumers cannot easily switch to alternative products. However, there may be distant substitutes or alternative solutions that consumers might consider, but these do not significantly affect the monopolist's market power.
How do the existence and similarity of substitutes affect the price leas its of demand for a good?
The existence and similarity of substitutes directly impact the price elasticity of demand for a good. When close substitutes are available, consumers can easily switch if the price of the good increases, making the demand for that good more elastic. Conversely, if there are few or no similar substitutes, demand tends to be more inelastic, as consumers have limited alternatives and are less responsive to price changes. Thus, the presence of substitutes generally leads to greater sensitivity in demand relative to price fluctuations.
What is a close substitute?
Close substitutes are those goods that could closely take the place of a particular good.
What type of competitive structure exists when a firm produces a product that has no close substitutes?
monopoly
When does a firm have market power?
A firm is a monopoly if it is the sole seller of its product and if its product has no close substitutes.
If products c and d are close substitutes an increase in the price of c will?
increase the demand for d
Why is a item that has many close substitutes tend to have an elastic demand?
An item with many close substitutes tends to have elastic demand because consumers can easily switch to alternative products if the price of the item rises. This sensitivity to price changes means that even a small increase in price can lead to a significant drop in quantity demanded, as consumers opt for substitutes. Conversely, if the price decreases, the demand for the item may increase sharply as it becomes more attractive relative to its alternatives. Therefore, the presence of close substitutes increases the responsiveness of consumers to price changes.
Will products that are very important to us and that have no close substitutes have elastic or inelastic demand?
Products that are very important to us and have no close substitutes typically exhibit inelastic demand. This means that consumers will continue to purchase these products even if prices rise, as there are no alternatives available that can satisfy their needs. The necessity and lack of substitutes lead to a smaller change in quantity demanded in response to price changes.
Are the Britannica on paper and the Britannica on CD close substitutes?
Yes, the Britannica on paper and the Britannica on CD can be considered close substitutes because they both contain the same information and serve the same purpose of providing encyclopedic knowledge. The main difference lies in the format and accessibility of the information.
Does a pure monopoly have substitutes?
A pure monopoly typically has no close substitutes for its product or service, which allows it to exert significant control over pricing and supply in the market. This lack of substitutes is a defining characteristic, as consumers cannot easily switch to alternative products. However, there may be distant substitutes or alternative solutions that consumers might consider, but these do not significantly affect the monopolist's market power.
How do the existence and similarity of substitutes affect the price leas its of demand for a good?
The existence and similarity of substitutes directly impact the price elasticity of demand for a good. When close substitutes are available, consumers can easily switch if the price of the good increases, making the demand for that good more elastic. Conversely, if there are few or no similar substitutes, demand tends to be more inelastic, as consumers have limited alternatives and are less responsive to price changes. Thus, the presence of substitutes generally leads to greater sensitivity in demand relative to price fluctuations.
What is close subsitute of a product?
A close substitute of a product is one which can easily replace it - eg margarine is a close substitute of butter. Two products are substitutes if they have a positive cross-elasticity - as the price of one increases, the quantity of the other increases
Beef poultry and dairy products are they elastic or inelastic?
They are separate in nature so you must separate them into different elasticities. Beef is elastic because there are close substitutes. Dairy is currently inelastic because substitutes are not as available, however recently items such as soy and almond milk are impeding on this market and if these items create a close substitute good , then demand will be elastic.
What factors tend to make demand curves more price elastic?
Close substitutes, increased income, luxury goods, time. Addiction makes demand less elastic, (inelastic) ex. Cigarettes. As time increases more substitutes become available.
