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perfect substitute


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A good which is indistinguishable in use from another. If two goods are perfect substitutes, their prices (per comparable unit) must be the same if both are to be used: the elasticity of substitution between them is infinite, and any price difference will lead to all consumers choosing the cheaper. An indifference curve between them is a straight line. Goods may be perfect substitutes in some but not all uses.

Subjects: Economics.


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