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Economics Homework Four - Model (view source)
Revision as of 20:05, October 11, 2009
, 20:05, October 11, 2009added one
:The “substitution effect” starts off when the price a good increases. Since people do not want to pay the higher price, the substitute of the item starts to sell more due to its lower price. As a result the demand for the good with the higher price decrease as the demand for the lower priced substitute increases. (Leonard)
:The “substitution effect” starts off when the price a good increases. Since people do not want to pay the higher price, the substitute of the item starts to sell more due to its lower price. As a result the demand for the good with the higher price decrease as the demand for the lower priced substitute increases. (Leonard)
:When the price of a good increases, or the price of it's substitute decreases, the demand for the initial good lessens. If the companies who make butter all decided to double the price of their product, less people would buy butter. Likewise, if the people who made margarine decided to cut their price in half, more people would buy that instead of butter. This is called the substitution effect, and it is part of the reason why the Law of Demand is true. (Michelle)
7. Charity is based on the foundation of a successful free market. Or is a successful free market based on a foundation of charity? Describe and explain which is the cart, and which is the horse (in other words, which comes first or is most important, charity or the free market).
7. Charity is based on the foundation of a successful free market. Or is a successful free market based on a foundation of charity? Describe and explain which is the cart, and which is the horse (in other words, which comes first or is most important, charity or the free market).