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What are Substitutes in economics?

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Final answer:

Substitutes in economics refer to goods or services that serve a similar function as another, potentially influencing market demand based on their price and availability.

Step-by-step explanation:

In economics, a substitute is a good or service that can be used in place of another good or service. For example, as electronic books become more prevalent, there can be a decrease in demand for traditional printed books. This response to the availability and pricing of substitutes is guided by the law of demand. If the price of a substitute, like tablet computers, drops, the quantity demanded for them goes up, leading to a decrease in demand for alternative products such as laptops.

Substitution is integral to understanding market dynamics. It is the concept whereby consumers can shift their preference to a different product when the original becomes too expensive or inferior. The availability of close substitutes makes the demand for a product more elastic because consumers can easily switch to alternatives.

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