The interchangeability of goods is determined by the following characteristics:
purpose;
quality;
area of use;
price;
technical parameters.
In general, the buyer does cash app database not care what kind of product he buys, as long as there is interchangeability. The consumer's choice in this case is explained by the combination of price and quality, income level, and availability of the product.
As we have already said, absolute interchangeability of goods is much less common than relative interchangeability. The cost of a product depends on the demand that arises for it. That is, interchangeable goods operate on the principle: when the price of one of the goods increases/decreases, the indicators for the others change according to the principle of direct proportionality. An example of such a phenomenon is the decrease in the cost of kefir, which will lead to a drop in demand for ryazhenka.
In a market economy, the interchangeability of goods plays an important role in analyzing the situation and setting prices. In order to correctly set the cost of a product, it is necessary to fully study the characteristics and market aspects, otherwise there is a possibility of going into deep minus.
Let's remember the law of formation of supply and demand: if the price of a product increases, then the second also becomes larger, and the first decreases. By and large, this formula is an average ideal situation on the economic market. But textbooks always present one thing, and in reality the situation becomes different. There are a huge number of factors that shift economic equilibrium, and the presence of substitutes is one of them.
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Types of demand
There are several types of demand:
Inelastic – a change in price has little effect on demand. For example, these are essential goods (food) and hard-to-replace goods.
Elastic - changes in price significantly affect demand. For example, luxury goods, easily replaceable goods.
Of course, a sharp change in prices can lead to a negative reaction from buyers. But consumer concerns can be minimized by using the elasticity of demand formula:
Elasticity = Percentage of transformation of quantity demanded / Proportion of change in price.
It indicates options for the required quantity of goods depending on the price dynamics:
if it turns out to be >1 , demand is elastic;
if the value is <1 , then the need is inflexible;
If the calculation result is equal to 1 , then the elasticity is unitary.
Demand for interchangeable goods is flexible, and prices strongly influence each other and dictate dependence. When the cost of one product increases, the need for another, where the price is lower, will sharply increase. An alternative product with similar qualities and a more attractive price will naturally appear to the buyer in a favorable light. For example, if the price of the Napoleon cake increases, then the producers of Prague, who did not change it, will remain in the black.
Cross elasticity is a change in the quantity of a product purchased in response to the price dynamics of another. If this indicator is greater than zero, then such goods are interchangeable. If the price of chicken meat rises, then turkey calmly increases sales volumes, because these products are substitutes. But if it is difficult or impossible to find an alternative, the consumer will buy the main product.