ECON-1020 Chapter Notes -Complementary Good, Economic Equilibrium, Inferior Good
12 May 2022
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Market: a collection of places, institutions, and means that allow individuals and businesses to buy and sell goods and services, labor, stock, etc. If price increases, the quantity people buy decreases. If price decreases, the quantity people buy increases. Primary reason: substitutes exist for many goods and services. Another reason is that our income doesn"t change. Luxury goods seem to be, but actually are not because higher-priced things are believed to be higher-quality, which is what drives buyers. Tastes/preferences change over time affects what consumers buy. Normal good: more is bought of this if income increases. Inferior good: less is bought of this if income increases. Some goods are relatively independent of income: Substitute goods: when the price of one increases, purchases of the other increase. Ex: coffee & cream, gas & cars. A decrease in the price of a complementary good will cause its complement"s equilibrium price to increase and the equilibrium quantity to increase.
