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These types of substitutes can be referred to as close substitutes. [3] Substitute goods are commodity which the consumer demanded to be used in place of another good. Economic theory describes two goods as being close substitutes if three conditions hold: [3] products have the same or similar performance characteristics
The original equilibrium price is $3.00 and the equilibrium quantity is 100. The government then levies a tax of $0.50 on the sellers. This leads to a new supply curve which is shifted upward by $0.50 compared to the original supply curve. The new equilibrium price will sit between $3.00 and $3.50 and the equilibrium quantity will decrease.
When migrant workers are sent home during economic downturns and native workers take their place, the assumption is that the two types of labor are substitutes, but if cheap labor is necessary to make domestic industries competitive, this requires migrant labor to be complementary. [3] Different types of labor (e.g., skilled and unskilled) may ...
According to the Energy Information Administration (EIA), as of March 2022, factors that affect the price of gasoline in the United States include the price of crude oil per barrel, costs and profits related to refining, distribution, and marketing, and taxes, along with the charge set by refiners for gasoline based on based on octane levels, with higher octane levels—premium grade cost ...
For two goods, fuel and new cars (consists of fuel consumption), are complements; that is, one is used with the other. In these cases the cross elasticity of demand will be negative, as shown by the decrease in demand for cars when the price for fuel will rise. In the case of perfect substitutes, the cross elasticity of demand is equal to ...
Price of related goods: The principal related goods are complements and substitutes. A complement is a good that is used with the primary good. Examples include hotdogs and mustard, beer and pretzels, automobiles and gasoline. (Perfect complements behave as a single good.) If the price of the complement goes up, the quantity demanded of the ...
Pricing the base good at a relatively low price - this approach allows easy entry by consumers (e.g. low-price consumer printer vs. high-price cartridge) Pricing the base good at a relatively high price to the complementary good - this approach creates a barrier to entry and exit (e.g., a costly car vs inexpensive gas)
In auction theory and competitive equilibrium theory, a valuation function is said to have the gross substitutes (GS) property if for all pairs of commodities: () (). I.e., the definition includes both substitute goods and independent goods , and only rules out complementary goods .