Economics 1021A/B Chapter Notes -Complementary Good, Substitute Good, Opportunity Cost

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

Document Summary

Producers offer items for sale only if the price is high enough to cover their opportunity cost. And consumers respond to changing opportunity cost by seeking cheaper alternatives to expensive items. Any arrangement that enables buyers and sellers to get information and to do business with each other. A market that has many buyers and sellers, so no single buy or seller can influence the price. When the price of a good rises, other things remaining the same, its relative price its opportunity cost rises. As the opportunity cost of a good rises, the incentive to economize on its use and switch to a substitute becomes stronger. When a price rises, other things remaining the same, the price rises relative to income. Faced with a higher price and an unchanging income, people cannot afford to buy all the things they previously bought.