Determinate of Demand - Substitutes - Siu Mai vs Har Gow

Substitutes - Siu Mai (HK) vs. Har Gow

(Pork & Mushroom dumpling vs. Shrimp dumplings)

Substitutes are two goods that can be substituted for one another. Usually the substitution happens when the price of one good increases/decreases making the other good a better/worse purchase.

We tend to substitute one good for another to increase/maintain our purchasing power.

The substitution effect reinforces the income effect.

Remember that the 3 reasons the demand curve slopes downward are the:

Income effect - as the price of a good increases our purchasing power decreases, or when prices decrease we tend to buy more stuff (or purchasing power increases)

Substitution effect - When the price of one good increases we substitute a cheaper good to maintain our purchasing power.

Diminishing Marginal Utility - the more we consume the lower the price must be to entice us to consume more as our satisfaction, benefit, value, happiness falls with each unit of consumption.

Siu Mai - Siu Mai Wikipedia

Ha Gow - Har Gow Wikipedia

AP question - The price of Siu Mai increases what happens to the demand curve for Har Gow?

If the price of Siu Mai increases people will substitute Har Gow as it is relatively cheaper. Thus the demand curve for Har Gow will shift rightward to show an increase in demand at all prices.

AP Question - The price of Siu Mai decreases what happens to the demand curve for Har Gow?

The price of Siu Mai has fallen and is therefore relatively cheaper than Har Gow. The demand curve for Har Gow will shift leftward/decrease as the cheaper price of Siu Mai attracts consumers away from the consumption of Har Gow. Less is demanded at every price.