How does an increase in the price of a substitute good affect the demand for a product?

An increase in the price of a substitute good typically results in an increase in the demand for the product in question. When the price of a substitute rises, consumers are more likely to seek alternative products that can fulfill the same need or satisfaction. This behavior reflects a fundamental principle in economics regarding the relationship between goods that serve similar purposes; as the cost of one increases, consumers turn to other options, increasing their demand.

For example, consider two substitute goods: coffee and tea. If the price of coffee rises significantly, consumers who previously purchased coffee may start buying more tea instead. Thus, the demand for tea would increase as a direct response to the higher price of its substitute, coffee.

This interaction demonstrates the substitutive relationship between the two goods, affirming that increases in the price of one can positively influence the demand for the other. Understanding this relationship is crucial in analyzing market behaviors and consumer choices in economic studies.