What does it mean for goods to be substitutable?

Goods being described as substitutable means that they can be used in place of each other with minimal impact. This implies that while the goods may not be identical, their characteristics and functions are sufficiently similar that a consumer can choose one over the other without a substantial loss in utility or performance.

For example, if two different brands of a household cleaner have similar active ingredients and effectiveness, a consumer might switch from one to the other without feeling that they are sacrificing quality. This flexibility in consumption benefits buyers by providing more choices and encourages competition among suppliers.

The other options present different interpretations of substitutability that do not accurately capture its essence. The notion of identical goods implies that there would be no functional difference at all, which is not the case in the context of substitutable goods. Sourced from different suppliers doesn’t inherently signify substitutability, as goods can come from various suppliers but still not be replaceable due to significant differences in functionality or quality. Lastly, goods with significant variations in quality and use contradict the idea of substitutability, as substantial differences would likely mean that substitutions would come with notable impacts on the user experience.