ECO101H1 Study Guide - Midterm Guide: Marginal Cost, Demand Curve, Marginal Utility
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ECO101H1 Full Course Notes
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Ex. 1 your brother gives you a frequent flier coupon, which allows you to pay less than the regular airfare on any flight you choose to take. You coupon can be used any time, and you often fly. Toronto/vancouver airfare is for a regular ticket. You value the trip from toronto to vancouver at. [reason: coupon has an opportunity cost of , since it can be used in other flights] Insight: if coupon could only be used on toronto/vancouver trip, its opportunity cost would be zero and you should take the trip. The government removes a sales tax that had been levied on sellers. If the market price does not change, we can conclude that the supply curve is perfectly elastic. From the graph, we can see that the supply curve is perfectly elastic, but the market price does change, falls by.
