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Economics vocabulary · Markets, Supply and Demand

Substitute

Meaning in economics, with examples

/ˈsʌbstɪtjuːt/nounCommon term

In economics, substitute means: A product that can be used instead of another, such as tea and coffee; when the price of one rises, demand for the other usually goes up.

In Turkish: ikame mal, ikame ürün

How it is used

Learned together with complement, a good used together with another (cars and fuel). Substitutes have a positive cross-price elasticity of demand, and the more close substitutes a product has, the more elastic its demand.

Example sentences

  1. When beef prices rose, many families bought chicken as a cheaper substitute.

  2. Products with few substitutes, such as petrol, have inelastic demand.

Common collocations

  • close substitute
  • cheaper substitute
  • substitutes and complements
  • substitute goods
  • elasticityA measure of how strongly the quantity demanded or supplied responds to a change in price, income or another factor.
  • demandThe amount of a good or service that buyers are willing and able to purchase at each possible price during a given period.
  • demand curveA line on a graph showing how much of a product buyers want at each price; it usually slopes downwards because people buy more when the price falls.
  • commodityA basic raw material or farm product, such as oil, copper, wheat or coffee, that is traded in large amounts and is much the same whoever produces it.

This word in other fields

The same English word can have a different meaning in another field:

More terms: Markets, Supply and Demand

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This page explains English vocabulary for learners. It is not financial advice.