Coke and Pepsi, McDonald's and Burger King hamburgers, or Crest and Colgate toothpastes are examples of substitute goods. These products are substitutes because they satisfy similar consumer needs and possess significant cross-price elasticity. The price of Pepsi, for example, has a direct correlation on the demand for Coke. Pepsi's price increase yields a demand increase for Coke and vice versa.Continue Reading
Burger King and McDonald’s hamburgers are examples of substitute goods because they satisfy the consumer’s needs of being served quickly and eating a relatively inexpensive hamburger. These two goods also satisfy the positive cross-elasticity component of demand for substitutes. The price of one chain’s hamburger has a direct effect on the demand for the other’s and vice versa.
Two goods are defined as “close substitutes” if they exhibit a high cross-elasticity and “weak substitutes” if they exhibit a marginal cross-elasticity. Goods are defined as “perfect substitutes” if the consumer receives the exact same utility from the two goods. Therefore, consumer preference plays a part in the definition of a perfect substitute. Coke and Pepsi may be perfect substitutes to one consumer because he receives the same satisfaction from both. However, a different consumer may define Coke and Pepsi as near-perfect substitutes because he believes one tastes better than the other.
Substitute goods are born from the basic concept of competition. Substitute goods provide the consumer with the freedom to choose and force the supplier to innovate and offer a quality product at a reasonable price.Learn more about Economics
Examples of elastic goods are coffee, airline tickets and stocks. Examples of inelastic goods are water, electricity, and telephone service. The elasticity of a good is the sensitivity of its demand to changes in its price.Full Answer >
Bartering involves exchanging goods or services for other goods and services without involving money. For example, a store owner giving a contractor store credit in exchange for carpentry work is an example of bartering. A baker might bake a cake for his accountant in exchange for services.Full Answer >
Consumer goods include household appliances, cleaning products, food, furniture and electronics. The number of consumer goods is potentially infinite and growing, as any good that a person buys for household use or consumption qualifies. Consumer goods are typically categorized as durable or nondurable. Consumer services, which are intangible, are sometimes included under the umbrella of consumer goods.Full Answer >
Some examples of capital goods, which are assets used to produce consumer goods and services, are machine tools, buildings, computers, baggage-handling systems, oil rigs and battleships. In the United States, the capital-goods sector is represented by companies such as Boeing, Caterpillar and Lockheed-Martin. Capital goods, such as conveyor belts, are used to produce consumer goods, such as candy bars.Full Answer >