Effect of Price Change on a Substitute Good

The concept of substitute goods plays a vital role in understanding consumer behavior and market dynamics in microeconomics. This research paper examines the effect of a price change in one good on the demand for its substitute good. Using the law of demand and cross elasticity of demand, the paper explains how a rise or fall in the price of one product influences consumer preferences and market equilibrium of related goods. Real-life examples such as Coca-Cola and pepsico are used to illustrate the concept. The study concludes that substitute goods have a direct relationship in terms of demand and that cross elasticity of demand is positive in such cases.