What do understand by substitute goods

Answer :

Substitute goods are those goods which satisfy the same type of demand and hence can be used in place of one another like tea and coffee or ball pen and ink pen.In case of such goods increase in the price of one causes increase in demand for the other and decrease in the price of one cause the decrease in the demand for the other.

Substitute goods show direct relation between each other i.e quantity demanded of one good is positively related to the change in the price of the other good. For example if the price of coffee rises, consumer will shift from consumption of coffee to the consumption of tea (to avoid extra expense)as both provide same level of satisfaction.

Price of coffee- rises , demand for tea- rises
Price of coffee- falls , demand for tea- falls

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