Answer:
The substitution effect
Explanation:
At a given level of income, if the price of a good is increased, the good becomes more expensive and consumers can no longer afford to purchase the good ,therefore, they shift consumption to cheaper goods . Also, if price falls, goods become cheaper and consumers increase demand for the good. This is known as the substitution effect. This is one of the factors that cause a downward sloping demand curve.
The other reasons for a downward sloping demand curve are the income effect and diminishing returns.
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Answer:
substitute products
Explanation:
Substitute products are different products that satisfy the same needs and are sold to the same target market. They share similar characteristics with the other products, specially in price. For example, Coke and Pepsi are substitute products.
Products that satisfy similar characteristics but are sol to different target markets are not substitute. E.g. Camaros are not substitutes for Ferraris.
That is why a change in the price of one substitute product can alter the demand of the other products.
