Editing Substitute good (section)

====Imperfect substitutes====
[[File:Perfect-imperfect-substitutes-indifference-curve.png|thumb|228x228px|Figure 4: Comparison of indifference curves of perfect and imperfect substitutes]]
Imperfect substitutes, also known as close substitutes, have a lesser level of substitutability, and therefore exhibit variable marginal rates of substitution along the consumer [[indifference curve]]. The consumption points on the curve offer the same level of utility as before, but compensation depends on the starting point of the substitution. Unlike perfect substitutes (see figure 4), the indifference curves of imperfect substitutes are not linear and the marginal rate of substitution is different for different set of combinations on the curve.{{cn|date=August 2022}} Close substitute goods are similar products that target the same customer groups and satisfy the same needs, but have slight differences in characteristics.<ref name=":3" /> Sellers of close substitute goods are therefore in indirect competition with each other.

Beverages are a great example of imperfect substitutes. As the price of Coca-Cola rises, consumers could be expected to substitute to  Pepsi. However, many consumers prefer one brand over the other. Consumers who prefer one brand over the other will not trade between them one-to-one. Rather, a consumer who prefers Coca-Cola (for example) will be willing to exchange more Pepsi for less Coca-Cola, in other words, consumers who prefer Coca-Cola would be willing to pay more.

The degree to which a good has a perfect substitute depends on how specifically the good is defined. The broader the definition of a good, the easier it is for the good to have a substitute good. On the other hand, a good narrowly defined will be likely to not have a substitute good. For example, different types of cereal generally are substitutes for each other, but [[Rice Krispies]] cereal, which is a very narrowly defined good as compared to cereal generally, has few, if any substitutes. To illustrate this further, we can imagine that while both Rice Krispies and [[Froot Loops]] are types of cereal, they are imperfect substitutes, as the two are very different types of cereal. However, generic brands of Rice Krispies, such as [[MOM Brands|Malt-o-Meal's]] Crispy Rice would be a perfect substitute for Kellogg's Rice Krispies.

Imperfect substitutes have a low cross-elasticity of demand. If two brands of cereal have the same prices before one's price is raised, we can expect sales to fall for that brand. However, sales will not raise by the same amount for the other brand, as there are many types of cereal that are equally substitutable for the brand which has raised its price; consumer preferences determine which brands pick up their losses.