Substitutes
Substitutes are goods that are interchangeable or serve similar purposes. When one substitute's price increases, demand for the other increases (positive cross-price elasticity).
Real World
When Netflix raised its UK subscription price in 2024, sign-ups to Disney+ and Amazon Prime Video increased as consumers switched to cheaper streaming alternatives.
Exam Focus
Always state that cross-price elasticity is positive for substitutes — a common error is describing the relationship without giving the correct sign.
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