What does the substitution principle indicate about value?

The substitution principle in economics suggests that the value of a good or service can be influenced by the availability and cost of similar items. When one item becomes more expensive, consumers may turn to other comparable items that serve as substitutes, which can lead to fluctuating values based on competition in the market.

When similar items have varying costs, this dynamic reinforces the idea that the value is not fixed but rather contingent upon market conditions and consumer choices. If the price of a substitute rises, the demand for the original item may increase as consumers look for viable alternatives. This highlights that value is interrelated with the options available to consumers, thus making cost and availability of similar goods pivotal factors in value determination.