MGEC40H3 Lecture : Chapter 6 textbook ( 4th edition)
19 Apr 2011
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C40 chapter 6 examining data on consumer travel patterns. 2 firms directly compete if a price increase by one causes many of its customers to do business with the other. Products tend to be substitutes when 3 conditions hold: they have the same or similar product performance characteristics. describes what it does for consumers: they have the same or similar occasions for use. describes when, where and how it is used ie orange juice & cola ( not alike: they are sold in the same geographic market. 2 products are in different geographic markets if they 1) are sold in different locations 2) it is costly to transport the goods and 3) it is costly for consumers to travel to buy the goods. The degree to which products substitute for each other is measured by the cross price elasticity of demand.
