Final answer:
The principle of substitution in economics refers to the concept of consumers substituting one good or service for another in response to changes in relative prices. In the context of a single-family residence, the principle of substitution explains how individuals make housing choices based on availability and affordability of different options.
Step-by-step explanation:
The principle of substitution in economics refers to the concept of consumers substituting one good or service for another in response to changes in relative prices. In the context of a single-family residence, the principle of substitution applies to the choices made by individuals when it comes to housing options.
For example, if the price of single-family residences increases significantly, some individuals may choose to substitute by purchasing a townhouse or condominium instead, which may be more affordable. On the other hand, if the price of single-family residences decreases, individuals may choose to substitute by upgrading from an apartment to a single-family residence.
The principle of substitution demonstrates how the availability and affordability of different housing options influence consumer choices in the housing market.