In the case of substitutable goods, a change in the price of one good can directly influence the demand for the other. For instance, consider Pepsi Cola and Coca Cola, two popular soft drinks that serve a similar purpose for consumers. If the price of Pepsi Cola rises, consumers will find it relatively more expensive compared to Coca Cola. As a result, many consumers may choose to forgo Pepsi and instead purchase Coca Cola, leading to an increase in its demand.
This relationship highlights the concept of substitution effect in economics, where consumers will substitute away from a more expensive product in favor of a cheaper alternative. So, simply put, when the price of one substitute goes up, the demand for the other substitute tends to go up as well, as consumers adjust their purchasing habits to maximize their utility.