A substitute good is a good or service which performs the same function as another good and can therefore be used as an alternative.
To substitute simply means to replace one thing for another thing. Just like in football, a coach would substitute one defender for another defender as they can perform the same role. The coach would be mad though to substitute a forward for their goalkeeper!
In order for a good or service to be truly considered a substitute for another, it does not need to be identical, but it does need to be similar enough that the user is satisfied with the end result.
Icons made by Freepic from www.flaticon.com
Key terms:
Demand – the amount of a good or service that consumers are willing to buy at given prices over a period of time.
Quantity demanded – the amount of a good or service that consumers are willing to buy at a specific price over a period of time.