Two goods that can replace each other in consumption are known as what?

Two goods that can replace each other in consumption are known as what?

• A. Substitute
• B. Complement
• C. Normal Goods
• D. Inferior Goods

Answer: (A)

Substitutes are goods that can replace each other in consumption. When the price of one falls, people tend to switch to that cheaper option, increasing its demand and reducing demand for the other good; the reverse happens if its price rises. For example, tea and coffee can satisfy the same need, so they are substitutes. Complements are goods used together, not replacements. Normal goods are those whose demand rises with income, while inferior goods see demand fall as income rises.

Substitutes are goods that can replace each other in consumption. When the price of one falls, people tend to switch to that cheaper option, increasing its demand and reducing demand for the other good; the reverse happens if its price rises. For example, tea and coffee can satisfy the same need, so they are substitutes. Complements are goods used together, not replacements. Normal goods are those whose demand rises with income, while inferior goods see demand fall as income rises.