What happens when there is a decrease in the price of a substitute good?

When there is a decrease in the price of a substitute good, the demand for the original good typically decreases. This is because consumers tend to switch from the original good to the now cheaper substitute, leading to a decline in the quantity demanded of the original good.

For example, if the price of coffee falls, some consumers may choose to buy coffee instead of tea, which is considered a substitute. As a result, the demand for tea decreases since consumers are opting for the less expensive coffee.

This relationship illustrates the concept of demand elasticity and consumer preference, where the substitution effect plays a crucial role. When the price of a substitute decreases, it makes that substitute more attractive, leading to a shift away from the original good. This reflects how interconnected market dynamics are, particularly among goods that fulfill similar needs or desires.