What does an increase in the price of a substitute good typically do to the demand for another good?

When the price of a substitute good increases, consumers tend to seek alternatives that are now relatively cheaper. As a result, the demand for the other good, which serves as a substitute, increases. This phenomenon occurs because consumers try to maintain their level of utility by switching to the good that has not experienced a price increase, thereby driving up its demand.

For example, consider the scenario of butter and margarine as substitute goods. If the price of butter rises, consumers may purchase more margarine instead. This shift in consumer behavior is rooted in the idea of substitution, where higher prices for one good lead to increased consumption of a similar good that offers comparable benefits at a lower cost.

Understanding this relationship is crucial in analyzing market behaviors and demand curves, as it illustrates how interconnected the markets for substitute goods are and how price changes can ripple through related sectors.