Substitution hypothesis

So imagine you have a toy car and you want to play with it, but it's broken and you can't use it. You look around and see a toy truck. You decide to play with the toy truck instead because it's similar to the car and can do some of the same things.

In economics, substitution hypothesis works something like that. It means that when the price of something goes up, people will look for other things that are similar but cheaper, and use those instead.

For example, if the price of oranges goes up, people might decide to buy apples instead because they are similar and might be cheaper. Or, if the price of beef goes up, people might decide to buy chicken instead because they are similar and might be cheaper.

This happens because people want to keep buying the things they need or want, but they also want to save money. So, they look for other things that can do the same job but cost less. That's why the substitution hypothesis is important in economics.