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Substitute Resources

Definition

Substitute resources are resources that can be used in place of each other to produce a similar output. For example, if a company can use either labor or machinery to produce a product, these resources are substitutes.

Analogy

Think of substitute resources like different brands of smartphones. If you need a phone, you can choose between an iPhone or an Android device. Both serve the same purpose of communication, but they are substitute resources because they can be used interchangeably.

Related terms

Complementary Resources: Complementary resources are resources that are used together to produce a good or service. For example, labor and raw materials are complementary resources in manufacturing.

Change in Productivity: Change in productivity refers to the increase or decrease in the amount of output produced per unit of input. It measures how efficiently resources are being utilized.

Opportunity Cost: Opportunity cost is the value of the next best alternative foregone when making a decision. It represents what is given up in order to obtain something else.