Economics 1021A/B Chapter Notes - Chapter 3: Opportunity Cost, Relative Price, Marginal Cost

• School: Western University
• Department: Economics
• Course: Economics 1021A/B
• Professor: Prof

Document Summary

Physical place where buyers and sellers meet. Most= unorganized collections of buyers and sellers. Competitive market: a market that has many buyers and many sellers, so no single buyer or seller can influence the price. Producers offer items for sale only if the price is high enough to cover opportunity cost. Consumers respond to changing opportunity cost by buying alternative/cheaper items. Money price: # of dollars that must be given up in exchange for a product. Relative price: ratio of one price to anotheropportunity cost. Demand: want it, can afford it, plan to buy it. Quantity demanded: the amount that consumers plan to buy during a given time period at a particular price. Quantity demanded can be > quantity bought. Measured as an amount per unit of time. The law of demand: the quantity demanded varies inversely with price. 2 reasons: on the product: substitution effect: as price rises, relative price rises.