Economics 1021A/B Lecture 3: Micro- Chapter 3

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

Document Summary

Each good is unique but has substitutes that can be used in its place. Income effect: when a price rises, other things remaining the same, the price rises relative to income. The good whose price has increased will be one of the goods that people buy less of. Willingness and ability to pay: the willingness and ability to pay is a measure of marginal benefit. If a small quantity is available, the highest price that someone is willing and able to pay for one more unit is high. Substitute good is a good that can be used in place of another good. If the price of a good increases, the demand for the substitute increases. Complement good is a good that is used in conjunction with another good. If the price of a good increases, the demand for the complement good decreases: expected future prices.