Editing Substitute good (section)

==In perfect and monopolistic market structures==

===Perfect competition===
Perfect competition is solely based on firms having equal conditions and the continuous pursuit of these conditions, regardless of the market size <ref>{{Cite web |last=Lordkipanidze |first=Revaz |date=2022-04-23 |title=Perfect Competition |url=https://www.researchgate.net/publication/359402074 |access-date=2022-04-23}}</ref> One of the requirements for [[perfect competition]] is that the goods of competing firms should be perfect substitutes. Products sold by different firms have minimal differences in capabilities, features, and pricing. Thus, buyers cannot distinguish between products based on physical attributes or intangible value.<ref>{{Cite web|last=Hayes|first=Adam|title=Understanding Perfect Competition|url=https://www.investopedia.com/terms/p/perfectcompetition.asp|access-date=2020-10-21|website=Investopedia|language=en}}</ref> When this condition is not satisfied, the market is characterized by [[product differentiation]]. A perfectly competitive market is a theoretical benchmark and does not exist in reality. However, perfect substitutability is significant in the era of [[deregulation]] because there are usually several competing providers (e.g., electricity suppliers) selling the same good which result in aggressive [[price competition]].

===Monopolistic competition===
[[Monopolistic competition]] characterizes an industry in which many firms offer products or services that are close, but not perfect substitutes. Monopolistic firms have little power to set curtail supply or raise prices to increase [[Profit (economics)|profit]]s.<ref>{{Cite journal|date=January 1989|title=Putting Ads between Hardcovers to Reduce Prices and Raise Profits|url=http://dx.doi.org/10.1080/01296612.1989.11727241|journal=Media Asia|volume=16|issue=3|pages=153|doi=10.1080/01296612.1989.11727241|issn=0129-6612|url-access=subscription}}</ref> Thus, the firms will try to differentiate their product through branding and marketing to capture above market returns. Some common examples of monopolistic industries include gasoline, milk, Internet connectivity (ISP services), electricity, telephony, and airline tickets. Since firms offer similar products, demand is highly elastic in monopolistic competition.<ref>{{Cite web|last=Chappelow|first=Jim|title=Monopolistic Competition Definition|url=https://www.investopedia.com/terms/m/monopolisticmarket.asp|access-date=2020-10-21|website=Investopedia|language=en}}</ref> As a result of demand being very responsive to price changes, consumers will switch to the cheapest alternative as a result of price increases. This is known as switching costs, or  essentially what the consumers are willing to give up.