Thursday, October 11, 2012

Demand Finale

I have personally exhibited purchasing a Substitute Good, which is a good that a consumer purchases in place of another one that has become less affordable. In class, we learned that since the income of that person remains the same, they are driven to purchase a cheaper substitute when the price of the original good rises. In result, the demand for the other product goes down if this becomes a trend among consumers.

Last week I needed to buy sticky notes for an English assignment. I was searching for a stack with a price below $2.00. I found some for more than $2.00 and wasn't willing to purchase that brand for that much with very little product. I searched some more and found substitute sticky notes for a cheaper price and they worked out great. This exhibited my use of a substitute good because I purchased a cheaper product, which served the same purpose (or utility) as the other good, in place of the more expensive product.

Question: When an original product is substituted, does it mean that the original product has elastic demand?

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