SUBSTITUTIONARY GOODS / SUBSTITUTES
In order to comprehend the ontological construction below, please refer to the respective posts for all notions in italic.
The substitution effect presents some commodities as substitutes when they replace each other on the market. A change in the price of a good is affecting the quantity of its substitutes because they meet part of its demand as cheaper alternative, or otherwise are replaced by it as more expensive. A change in the demand, or in the supply, of a good is typically given in such a proportion which can be covered by the alterations of other goods, there for the commodities on the two sides of the change are substitutionary goods.
Historical Backdrop
• AUGUSTIN COURNOT Researches into the Mathematical Principles of the Theory of Wealth: commodities in competition.
• VILFREDO PARETO Manual of Political Economy: competitive goods.
• JOHN HICKS and ROY ALLEN A Reconsideration of the Theory of Value: competitive goods.
• EUGEN SLUTSKY On the Theory of the Budget of the Consumer: competing goods.
• FRANCIS EDGEWORTH Papers Relating to Political Economy: competitive goods.
• KELVIN LANCASTER A New Approach to Consumer Theory: intrinsic perfect
substitutes.
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