ECON 1000 Chapter Notes - Chapter 4: Opportunity Cost, Normal Good, Inferior Good

• School: York University
• Department: Economics
• Course: ECON 1000
• Professor: Steven Edwards

Document Summary

No single buyer/seller can influence: opportunity cost: highest valued alternative forgone. Example: money price of coffee is and gum is 50cents, opportunity cost of one cup of coffee is two packs of gum. Demand is relationship between a quantity of a product, and quantity demanded. If you demand something than you: want it, can afford it, plan to buy it, quantity demanded: amount that consumers plan to buy during a given time at particular price. Measured as unit of time: law of demand: higher the price of a good, smaller quantity demanded. If price is high you want less, if price is low you want more. Why does higher price reduce quantity demanded: substitution effect: when relative price (opportunity price) goes up, people seek substitutes for it. Income effect: when price rises, price rises relative to income, people can not afford all the things they previously bought, quantity demanded decreases.