Substitutes are goods that can be used in place of each other. Unlike complementary goods, these goods are not consumed together. In general, the demand for a good moves in the direction of the price of its substitutes.

If the price of one good rises, consumers tend to shift their consumption to the substitute good. For example, since tea is a substitute for coffee, an increase in the price of coffee is likely to lead to an increase in the consumption of tea as consumers shift to the cheaper alternative.

Examples of goods which are substitutes of each other include tea and coffee. Another example is five-rupee coins and five-rupee notes, which are perfect substitutes as they provide exactly the same level of utility.