Change in the Price of a Substitute


If the price of a substitute changes, this will affect the demand for a good or service.


For example: There are two brands of toothpaste - type A and B. If the price of A decreases, and type A is considered to be a substitute for type B, consumers will buy more of toothpaste A and shift their consumption away from toothpaste B.


Remember, the price of Toothpaste B has not changed. The change in price of a substitute will cause a shift in the demand curve for Type B to the left and less will be demanded at each price.