Market-a system of diverse economic relations between people arising in the process of production, distribution, exchange, and consumption, based on certain principles, the main of which is the freedom of economic activity. At the same time, it is necessary to understand that the freedom of action of an entrepreneur in a market economy is not absolute. It, as in any other economic system, is limited, first of all, by-laws. They are based on the principle of state regulation of the market and market relations. Any market economy in a civilized state is regulated. This idea of the market is given in the work “Markets” by Lisa Herzog.
Market development is an important element of a stable economy of any state. The variety of products, their quality, and the technology for which they were made plays an important role in this process. What determines the further development of the market? If we consider the elements of the market that have both positive and negative impacts on the change in its size - we can distinguish two types of goods - complementary goods and substitutes. These products are opposites since an increase in demand for a complimentary product increases the demand for the main product, which leads to a drop in demand for a substitute product. Based on this relationship and taking into account the economic characteristics of both types of goods, the following thesis can take place:
The availability of substitutes in the market develops more than complementary products and contributes to the rapid growth of the market.
The main argument for this statement is those substitute products are always a source of greater and continuous competition than complementary products. Any market is subject to development in a competitive environment. The market economy is unthinkable without the implementation of the principle of competition. Without competition, the market mechanism does not work. Competition should be, first of all, between individual producers, enterprises producing homogeneous products. Imagine a market for substitute products - yogurt and ice cream. If there were no yogurt market, the ice cream market would flourish and people would be stuck on one product. As a result, earlier the market of the free competition will turn into a more monopolistic one that will create problems and obstacles to the development of the “cold” market. Competition is imperative in order to avoid monopolization and seizure of the market. Competition is one of the most effective and efficient means of stimulating business activity, using the achievements of scientific and technological progress, increasing product quality, meeting the changing demands of consumers. Davis, Peter, and Eliana Garcés. "Market Definition." In Quantitative Techniques for Competition and Antitrust Analysis, 161-229. Princeton University Press, 2010. http://www.jstor.org/stable/j.ctt7sqz9.8.
Another reason is that consumers' requests, as well as their taste preferences, often change. A buyer who makes a decision about meeting a particular need is in a world of alternatives. For example, on a hot summer day, being on the street, the buyer can quench his thirst in many alternative ways. He can buy an expensive Coke in the nearest store. He can buy cheaper lemonade, but for this, he needs to defend a 20-minute queue. The buyer can stroll through the area and find even cheaper water in the district shop. Each of these options has certain costs for the buyer, both monetary and non-monetary. Lemonade is cheaper than Coca-Cola, but the buyer must donate 20 minutes in a queue to buy it. When does a buyer buy a Coke? Then, when he considers other alternatives unprofitable. For example, if lemonade is the same as Coca-Cola, then the buyer will never buy it because to buy lemonade you need to spend time in the queue.
Consumers constantly demand something new and substitute products are often new quality and technology. They mean the appearance on the market of new products, displacing traditional ones and performing similar functions of previously existing products. The emergence of substitute goods sharpens the market struggle since the consumer has an alternative option and the choice will be made when comparing. This leads to the natural development of the market.
It is also worth noting the different elasticities in different markets. The presence of high elasticity contributes to the development of the market as the consumer has more options, which means that it is easy for him to satisfy the often changing taste preferences. This characteristic of the substitutes is very well expressed in the monopoly market. As a rule, the more of them, the more elastic the demand, since the change in prices for replacement and replacement goods always allows you to make a choice towards cheaper ones.