Talk:Substitute good

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how to use income effect and subtitution effect to define prefect substitute??

For perfect substitutes, the utility function is linear and is parallel to the budget constraint.

A change in income will be entirely income effect because it is a parallel shift of the budget constraint. A change in price will be entirely substitution effect because everyone will flock to the cheaper good.

It is probably better to define it using Cross Price Elasticity of Demand. The Cross Price Elasticity of Demand for perfect substitutes is positive infinity.

I'm thinking CD's and Cassette's are a lot close to perfect substitute goods than is implied here. Wine and Beer are pretty good substitute goods, and they are pretty different.

[edit] Merge

I don't really edit economics articles, but has anyone considered merging this and complement good into substitute and complement goods? They are a closely intertwined topic, and one will usually study the two together. Richard001 09:20, 13 September 2007 (UTC)