The availability of substitutes is really important when it comes to understanding how prices change. Here’s a simple breakdown of how it works:

1. Close substitutes: When there are many products that can easily replace one another, the demand becomes more elastic.

   For example, if the price of Coca-Cola goes up, people might just choose to drink Pepsi instead.

   This means that a small change in price can lead to a big change in how much people want to buy.

2. Lack of substitutes: On the other hand, if there are very few or no substitutes, demand is inelastic.

   Think about essential medications; if their prices go up, people usually have no choice but to buy them anyway.

3. Elasticity Formula: We can measure how elastic demand is by using this formula:

   $E_d = \frac{\%\text{ Change in Quantity Demanded}}{\%\text{ Change in Price}}$

In simple terms, when there are more substitutes available, it usually means demand is more elastic. This makes sense when you consider how customers tend to choose products!