Chapter 1: Ten Principles of Economics

Ten Principles of Economics and the Three Key Categories;

1. How people make decisions

1. People Face Tradeoffs
2. Cost of something is what you give up to get it
3. Rational people think at the Margin
4. People respond to incentives
2. How people interact
5. Trade can make everyone better off
6. Markets are a good way to organize economic activity
7. Governments can sometimes improve market outcomes
3. How the economy as a whole works
8. A country's standard of living depends on its ability to produce goods and
services
9. Prices rise when the government prints too much money
10. Society faces a short-run trade-off between inflation and unemployment

Scare good → describes the limited nature of society's resources, the whole concept
of economics relies on how well one can manage its scares goods and resources

Opportunity cost → What must be given up to obtain something else

Welfare system → aims to achieve more distributed economic well-being, when you
earn more you get less from the Welfare system

Econists main ideas;

- Like scientists they study people and how they interact with the economy
- Using models and assumptions to understand the bigger picture
- Ex. People only look at prices
- Models simplify reality

Micro-economics → looks at individual decision-makers households and firms and

how they interact in specific markets

Chapter 2: Thinking Like an Economist

Margin → the process of comparing the marginal benefit to the marginal cost

Marginal change → we change based on the exchange of marginal cost and marginal
benefit
- Small incremental changes to an existing plan of action
Marginal cost → the additional cost of producing one more unit of good or service
- Law of increasing marginal cost; As you produce more of a product, you must use
resources that are of lower quality or are more expensive

Marginal benefit → extra pleasure or satisfaction one gets from consuming one more unit
of a good or service.
- Law of diminishing marginal utility; the more you have of something, the less
satisfaction an additional unit provides

Optimal scale diagram;

Marginal Go Marginal
Benefit Cost
MB =
Marginal

Quant

Good assumption

Circular Flow diagram → simple way to show how money flows from households to
firms
1. Households give labour to firms
2. Firms give wages to households
3. Households buy goods and services from those firms

Economy production

Profit Maximizing Rule → produce where MR = MC

Sunk cost → a cost that has already been incurred and can't be changed going
forward
 - It is irrelevant to decisions

Production possibilities frontier (PPF)

- Shows the different combinations of goods and services an economy can produce with
its resources
- Introduces Opportunity cost and visualizes it
- It shows scarcity, tradeoffs, opportunity costs, efficiency
- Shape;
- Straight line = Constant opportunity cost
- Curve = Increasing opportunity cost

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Law of increasing opportunity cost (shown in PPF)

- When all resources are being used, an increase in the production of one good will lead
to greater forgone production of another good

PPF shifts (two main things)

1. A change in the quantity or quality of resources
2. Change in technology
3. Trade (comparative advantage)

Consumer Goods → Products created for direct consumption

Capital Goods → Products that create consumer goods

Correlation

Microeconomics study

Positive statements → describe how the world is (testable)

 - Ex. Raising the minimum wage will reduce employment among low-skill workers

Normative statements → describe how the world should be (statement based on what
society relies on most)
- Ex. the government should raise the minimum wage to help low-income workers

Chapter 3: Independence and Gains from Trade

Comparative advantage
- The one with a lower per-unit opportunity cost has a comparative advantage for that
product

Absolute advantage
- When someone can produce the most of both goods or services we are looking at

Per-unit opportunity cost → The # of units you lose / # of units you gain

Pattern of trade
- One country should specialize in something and then trade with another for whatever
else it needs
- The firm or country with a comparative advantage in a good or service should produce it

Chapter 4: Market Forces of Supply and Demand

Inferior goods → Where your demand goes down when your income goes up, or when your
demand goes up when your income goes down.
Ex. eating at Mcdonalds when you are a student

Consumer goods (three types)

1. Those that last a long time
2. Those that don't last long
3. services

Normal goods → When demand increases when income increases.

Ex. new car when you get a raise

Substitute goods
- An increase in the price of a substitute will increase the demand for the other substitute
- A decrease in the price of a substitute will decrease the demand for another substitute

Complementary goods
 - An increase in the price of a complement will decrease the demand for the other
complement
- A decrease in the price of the complement will increase the demand of the other
complement

Law of demand → there is an inverse relationship between price and quantity

demanded

Three reasons the demand curve is downward sloping

1. Substitution effect; if the price goes down for a good, people will buy more of that good
and move away from other substitutes. Vise Versa
2. Income effect; When the price goes down it affects the purchasing power of consumers'
income.
3. Law of Diminishing Marginal Utility; As you consume more of something, your
satisfaction will decrease

Shifters of the demand curve

1. Taste/Preferences
2. Number of Consumers
3. Price of Related goods (Supplements or complements)
4. Income (depends on if it is normal good or inferior good)
5. Expectations

Change in demand
- When the demand shifts

Demand increase → Curve shift to the right

Demand decrease → Curve shifts to the left

De
In

Law of Supply
 There is a direct relationship between price and quantity supplied
- Aka. an increase in price makes the quantity producers increase

Shifters of the supply curve

1. Price Resources; An increase in resources means less milk
2. Number of producers; more farmers means more milk
3. Technology; new milk machines mean more milk
4. Taxes & Subsidies
5. Expectations

Increase in supply → move curve to the right

Decrease in supply → move curve to the left

De

In

Market Equilibrium → Where supply and demand intersect

When markets are at dis-equilibrium;

- This could happen when price increases so consumers dont want to buy as many of that
good, so quantity demanded decreases. But in this instance producers want to produce
more of that good, so quantity supplied increases. (this creates a surplus)
- This could happen when price decreases so consumers want to buy more of that good,
so quantity demanded increases. But producers dont want to produce more of that good,
so quantity supplied decreases. (this creates a Shortage)

Change in quantity demanded

- When we move along the demand curve

Change in quantity Supplied

- When we move along the supply curve

Surplus
 - When the Quantity supplies is greater than the quantity demanded

Sur

Shortage
- When the Quantity demanded is greater than the Quanitity supplied

Sho

Chapter 5: Electricity and Its Application

Elasticity → the idea of how much less or more consumers buy, when questioning law of
demand
- In other words, it demonstrates what happens to quantity when there is a change in price

Inelastic → when a price increases the quantity demanded decreases but only by a
little bit
- Or when price decreases the quantity demanded increases but only by a little bit
- These products dont have many substitutes
- Necessity
- Has an elasticity coefficient that is less than 1

Elastic → When price increases a little Quantity decreases alot

- Or when price decreases a little Quantity increases alot
- Has an elasticity coefficient greater than 1
Unit Elastic → When price goes in either direction by a percent, Quantity moves in
the other direction by the same magnitude
- Elastisticy coefficient is = to 1

Perfectly Inelastic → A perfectly vertical line

- The quantity doesnt change no matter the price
- Eleacitity Demand coefficient is 0

Perfectly Elastic → A perfectly Horizontal line

- The quantity changes when the price doesnt
- Elacitity coefficient is infinity

Elasticity of Demand coefficient= abs(% Change in Quantity / % Change in price)

Total Revenue = Price * Quantity (Or the size of the box)

Close substitutes

Midpoint method (Used to find Elasticity of Demand coefficient)

- % Change in Quantity / % Change in price

While elastic → a decrease in price WILL increase total revenue

While at Unit elasticity → a decrease in price will not change toal revenue
While inelastic → a decrease in price WILL decrease total revenue

Price Elasticity of demand

- Shows how sensitive Quantity demanded is to a change in price
- % Change in Quantity Demanded / % Change in price

Price Elasticity of Supply

- % Change in Quantity Supply/ % Change in price
Cross-price elasticity of Demand
- % Change in Quantity of product A / % Change in price of product B
- Negative number means they are complements
- Positive number means Substitues

Income elasticity of Demand

- % Change in Quantity Demanded / % Change in income
- Negative number means inferior good
- Positive number means Normal good

Total Revenue Test

- If Price is increasing and Total Revenue is increasing then it is Inelastic
- If price is decreasing and Total Revenue is decreasing then it is Inelastic
- If price is increasing and Total Revenue is decreasing then it is elastic
- If price is decreasing and Total Revenue is Increasing then it is elastic

Chapter 6: Supply, Demand and Government policys

Price ceiling
- A maximum price that a seller is allowed to charge, this stops them from selling at the
equilibrium price
- Creating a shortage, if it is binding (if not binding nothing happens in the market)

Price Floor
- The minimum price that a buyers are expected to pay for a product
- Creating a surplus, if it is binding (if not binding nothing happens in the market)

Subsidies
- A benefit given to individuals or firms
- It will shift the curve to the left (increasing either supply or demand depending on the
problem)
- Total Subsidy is calculated by taking the price of the subsidy and multiplying it by the
Quantity
- This represents what consumers are paying firms
- Deadweightloss for this solution is found in the triangle between the two price points and
the equilibrium point
 S
S

Dead
Total

D
Taxes
- The curve would decrease by whatever weight the tax is
- Total Tax Revenue = the vertical change in price * quantity

ST
S

Cons

Total
Dead

Prod

D
Competitive markets → Should be left alone

Policy advisors → Analysis of the likely outcomes of different actions. But do not
make the final decision (policymakers do)

Chapter 7: Customers, producers, and the efficiency of Markets

Welfare economics; the study of how the allocation of resources affects economic wellbeing

Consumer surplus → The difference between what an individual is willing to pay for a
good or service and what they end up paying for it
- It cant be negative so if it falls below equilibrium there is no consumer surplus
Producer surplus → The difference between the price and how much a seller is
willing to sell a product for

Total surplus in Standard market → Value to buyers - Cost to sellers

Price Ceilings effect on Surplus → Producers lose a lot of surplus, decreases total
surplus

D S

Consu
Dead

Produ ce

Price Floor Effect on Surplus → Consumers lose a lot of surpluses, decreasing total
surplus

D S
Consu flo

Produ Deadw

Adam Smith → came up with the theory that the invisible hand of the marketplace
guides self-interest into promoting general economic wellbeing.

Efficiency → When total surplus is maximized

- Aka. it is inefficient if the good is not being bought by the buyer valuing it the most

Equity → the fairness of the distribution of well-being among society

Chapter 8: The Cost of Taxation

Deadweight loss of Taxation key points

- When a product is taxed the total surplus decreases, creating a deadweight loss.
However, another factor is added to the graph; Total Tax revenue. Which can be found
by;
- Total Tax Revenue = Change in price * Quantity

D S
Consum
Ta

Tax Deadw

Produ

Determinants of Deadweightloss → Elasticity determines the amount of deadweight

loss
- When supply or demand is more inelastic, the deadweight loss will be less

Bigger Tax = Bigger deadweight loss

The marginal cost of public funds → the change in total cost to society of raising $1 of
tax revenue

The marginal benefit of public funds → the benefit that society places on $1 of tax
revenue

Laffer curve → named after Arther Laffer, essentially saying that the relationship
between tax revenue and tax size is a concave down parabola. Raising taxes will
eventually decrease tax Revenue.
Chapter 9: International Trade

Equilibrium without trade

- The consumer surplus and Producer surplus will be equal

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Pr

D
World price → the price prevailing in the world market

When to export → when the world price is larger than the domestic price
When to Import → when the world price is lower than the domestic price

Winner and Losers of Trade - Exporting

- A low domestic price indicates that the country has a comparative advantage in
producing this good, and should therefore export
- When a country decides to trade by exporting producers become better off and
consumers become worse off

Winner and Losers of Trade - Importing

- A high domestic price indicates that the other countries have a comparative advantage
in producing a good, and should import
- When a country decides to trade by importing producers are worse off and consumers
are better off
- Tariffs are taxes on imports that move the market closer to equilibrium that would exist
without trade, overall reducing the gains from trade.
- This is because it causes great loss to consumers

Import Quotas
- A way to restrict international trade, a cap on how much can be imported

Tarif Vs. Import quotas

- They achieve the same thing of reducing imported goods, BUT Tariffs raise revenue for
the government. Where Import Quotas create a surplus for those who obtain a licence.
- The person obtaining the lisence has a revenue of domestic price - world price
Benefits of International Trade
1. Increase the variety of goods
2. Lower costs through economies of scale 📉
3. Increase competition 🏆
4. Enhance the flow of ideas 💡

5 Arguments of trade restriction

1. Jobs argument; jobs are destroyed and created by free trade
2. 🔐National-Security argument; being dependent on another country for something vital
could lead to a security risk. However, this claim is often made by companies that just do
not want to import because they will lose surplus.
3. 👶Infant-industry argument; helping the baby industries adjust to the new market,
however, this could be seen as unnecessary because most firms take temporary losses
and then succeed in the long term.
4. 📖Unfair-Competition argument; All firms should play by the same rules, however,
countries have different economic setups
5. 🫵Protection-as-a-bargaining-chip argument; when one country wants another to do
something they will bargain by threatening or other means. This may not work and could
cause the situation to worsen.

Chapter 10: Externalities

Externality → when someone engages in an activity that affects the well-being of a

bystander

Negative Externality → when the effect is adverse

Positive Externality → When the effect is beneficial

Private cost curve → the original supply curve without any externalities under
consideration
Social cost curve → when talking about negative externalities it's all about where we
place the social cost curve. It acts as a shift in supply, right for increase and left for
decrease
Deadweight loss of negative externality → because negative externalities move the
social cost curve above the price demanded at equilibrium, the deadweight loss is the triangle
between the new optimal price, market price
 S
D
S

PO
PM

Q Q

Private Value curve → the original demand curve, not taking into account externalities.
Social value curve → When talking about positive externalities, it acts the same as
the social cost curve but in terms of demand. Like a shift in demand, it goes right
for increase and left for decrease.
Deadweight loss of Positive externalities → because positive externalities move the
social value curve above the private value curve, there will be a shortage and
therefore deadweight loss.
D S

PO
PM

Q Q

The two ways governments can respond to externalities with

1. Command-and-Control Policies (Regulation); achieved by either forbidding or
requiring certain behaviour
2. Market-based Policies; They provide incentives so that private decision-makers will
choose to solve the issue on their own
a. Corrective Tax and Subsidies
- The supply of corrective tax is elastic, the price determines the quantity
b. Tradable pollution permits
 - The supply of pollution permits is inelastic, the Quantity determines the
price

Government policies in Canada → Two separate carbon tax systems are used in
Canada. One for individuals and the other for large corporations.

Corrective Tax → taxes enacted to correct the effects of negative externalities

- The ideal corrective tax would be equal to the external cost associated with the negative
externality
Internalizing the externality → the use of tax that makes buyers and sellers think
about the external effects of their actions.

Coase theorem → the proposition that if private parties can bargain without cost over
allocation of resources, they can solve the problem of externalities on their own

Private solutions to Externalities

1. Morals and social sanctions
2. Charities
3. self - interest of relevant parties
4. For interested parties to enter into contract

Transaction cost → the cost parties incur in the process agreeing too or following
through with a bargain

Chapter 11: Public Goods and Common Resources

The two groups of goods in the economy

1. Excludability
a. Excludable → If a buyer can be prevented from using a good
b. Not excludable → If its not possible to prevent buyers from a good
2. Rivals of Consumption
a. Rival of consumption → If one persons use of a good diminishes another
persons ability to use it

The two groups can be divided into four catagories

1. Private goods; both excludable and Rivals of consumption
2. Public goods; neither excludable or Rivals of consumption
3. Common resources; Rivals of consumption but not excludable
4. Club goods; Excludable but not rivals of consumption

Public goods
 - Public goods presents the free rider problem into the picture
- Free rider problem → when people have incentives to be free riders rather than
ticket buyers.
- Demand curves should be vertically summed
- Important public goods;
1. National defense
2. Basic Research
3. Fighting Poverty
- Cost- benefit analysis; the study that compares cost and benefit to society of providing
a public good

Common Resource
- Common resources create a problem called tragedy of commons
- Tragedy of Commons; a common story that illustrates why common resources get
used more then desirable from the standpoint of society
- Important Common Resources;
1. Clean Air and Water
2. Congested Roads
3. Fish, Whales, and Wildlife

Markets work best for private goods

Chapter 13: Cost of Production

Total Revenue (for a firm) → The amount a firm receives for a sale of output
Total Cost → The amount a firm pays to buy input
- = Explicit Costs + Implicit Costs
- = Fixed costs + Variable costs
Total Profit → Total Revenue - Total Cost

The two types of Opportunity costs

1. Explicit Costs → When money is being payed as the cost by the firm
- Ex. new fridge
2. Implicit Costs → Do not require money as the cost by the firm
- Ex. paying for a class to better skill

The Two types of Costs that make up Total Cost

1. Fixed costs; costs that do not change based on quantity of output produced
2. Variable costs; costs that change based on quantity of output produced

Economic Profit → Total Revenue - All total Opportunity costs

Accounting Profit → Total Revenue - Explicit costs

Production Function → the relationship between quantity of inputs used to make a good
and quantity of outputs of that good

Marginal product → the increase in output given 1 more unit of input

Diminishing Marginal product → the more you add of inputs, eventually outputs will
begin to decrease

Total average cost → Total cost / Quantity of output

Average Fixed cost → fixed cost / Quantity of output
Average Variable cost → variable cost / Quantity of output
Marginal cost → the increase that arises from extra unit of production

The Cost Curves → Marginal cost, Average Total cost, Average Fixed cost, and
Average Variable cost

Cost curves shape → the deciding factors

1. Rising Marginal Cost curve; reflects diminishing marginal product
2. U-Shaped Average Total cost; result of adding Fixed Cost and Variable Cost
3. Downward Average Fixed Costs; the cost diminished as more outputs produced
4. Upward Average Variable Costs; the cost rises as more outputs are produced
5. Relationship between Marginal Cost and Average Total Cost;
a. When marginal cost is less than Average Total Cost → ATC is
decreasing
b. When marginal cost is greater than Average Total Cost → ATC is
increasing

Efficient scale → the Quantity of output that minimizes ATC

Economies of scale → When long run ATC declines as output increases

Economies of disscale → When long run ATC increases as output increases
Constant returns of scale → When long run ATC doesnt change as output changes

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Disecono
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Quantity
Chapter 14: Firms of Competitive Markets

Competitive Market Characteristics

1. Many firms
2. Identical products
3. Firms can freely enter and exit
4. Maximize profit

Buyers and Sellers in competitive markets are Price Takers

Average Revenue → how much a firm makes for a unit sold

- For all firms, this is the price of the good
- Total revenue / Quantity outputted

Marginal Revenue → the change in total revenue by an additional unit of output

- For Competitive firms, Marginal Revenue = Price
- This is because Price is fixed for competitive markets so when we find Total
revenue it is P x Q, so nothing changes

Profit Maximizing
- When drawing the Cost and Revenue curves, MC ATC and AVC are all as described
before
- Now we add the idea of Marginal Revenue, which for competitive markets is
perfectly horizontal at a price because buyers and sellers are price takers
- When MR > MC, the rising production increases profit
- When MR < MC, the rising production decreases profit
- Profit-Maximizing Quantity → where the price line intersects MC curve, or
where MC = MR

Short-Run decision: Shut down Decision → The Firm loses all revenue from the sale of
product, but it saves variable costs
1. Shut down if TR < VC
2. Shut down if P < AVC

Sunk cost → a cost that has already been committed and cant be recovered

A competitive firm's short-run supply curve = MC curve above AVC

Competitive firms in the long-run price = ATC

Long-run decision: Exit → No revenue from sales production, but it saves variable cost AND
fixed costs
1. Exit if TR < TC
2. Exit if P < ATC
3. Enter if P > ATC
A firm with profit means where MR=MC > ATC
A firm with losses means where MR=MC < ATC

Firms can enter and exit in the LONG-RUN

Economic profit in the long-run = 0

Chapter 15: Monopoly

Monopoly firms are Price Makers

Monopoly Characteristics
1. If it is the sole provider of its product
2. It doesn't have any close substitutes

Cause of Monopolies → Barriers to entry

1. Monopoly resources
2. Government Regulations
3. The production process

Natural Monopoly → When one firm can supply a good or service to an entire market
at a lower cost than if there were more firms
- This means economies of scale caused these monopolies
- When firm's ATC curve gradually declines

Monopolies Vs Competition
- Competition firms are small compared to the market so they take the price as seen
- Monopoly firms are the sole producer in their markets so they can alter the price by
adjusting the quantity it supplies
- You can see this difference in the demand curves;
Total Revenue → Price x Quantity sold
Average Revenue → Total Revenue / Quantity sold
- Therefore Price = AR
Marginal Revenue → total Revenue when increasing by 1 unit of production
- MR < Price always for monopoly firms

When a Monopoly increases the amount it sells → it affects total revenue

1. Output effect; More input is sold, Q rises, and so does total revenue
2. Price effect; Price falls, and total revenue decreases

For Monopoly Firms → P = AR = Demand

Profit Maximization for Monopoly firms

- Profit maximizing Quantity is where P > MC = MR
- Produced where TC - TR is at its Max

Monopoly firms Profit

- Profit = (P - ATC) / Q
- The difference between Demand (AR) and ATC, multiplied by the Quantity

Welfare Costs of Monopoly

- Deadweight loss → if an inefficient scale is produced for a monopoly
deadweight loss is created
- It works a lot like tax, but instead of tax revenue going to the government. Its
called monopoly profit and it goes to the individual seller
Price Discrimination → the practice of selling the same good to different buyers at
different prices
- A firm must have market power

Important Examples of Price Discrimination

- Airline Prices
- Discount Coupons
- Financial Aid

Policymakers response to problem with Monopoly

1. By trying to make Monopolized industries more competitive
2. By regulating the behaviour of Monopolies
3. By turning private monopolies into public enterprises
4. By doing nothing at all

Public Policy towards Monopolies

- Regulations → when the government regulates a price that monopolies must
abide by

Chapter 16: Monopolistic Competition

Monopolistic competition → When there are many firms in a market and their
products are similar but not identical

Three Attributes of Monopolistic Competition

1. Many sellers
2. Product differentiation
3. Free entry and exit (eventually economic profits go to zero)

Examples of Monopolistic Competition → Books, Games, cookies, restaurants … etc

Short-Run Monopolistic Competition

- Works the same as a Monopoly
- MC = MR is where it produces
- Downward sloping demand curve for its product

Long-Run Equilibrium for Monopolistic Competition

- If there are economic profits, firms will enter
- Eventually, economic profits end at zero
- They produce below-the-efficiency scale

Monopolistic Competiton production → At less than efficiency scale

Markup over Marginal Cost
- Price exceeds Marginal cost because firms have market power
- More inelastic curve = more power = the greater the markup over marginal cost

Critique of Advertising → Firms manipulate people's Tastes to reduce competition

Defence of Advertising → Provides information to consumers

Brand Names → there are typically two types of firms, the one with a brand name and the
generic substitute for that brand name

Two Effects of Entry

1. Product-variety externality → positive externality on consumers, because
they get a greater variety and therefore a greater surplus
2. Business-stealing externality → negative externality on existing firms,
because they will lose profits from competitors

Chapter 17: Oligopoly

Oligopoly → a market with few sellers and their product is similar or identical

Important Examples of Oligopolies

- Cigarette industries
- Battery industries
- Cereal Industries
- Plane Ticket

Duopoly → two firms in one market

Collusion → agreement of firms in a market about quantities to produce or prices to

change
Cartel → a group of firms acting in unison

Nash Equilibrium → follow the leader-type strategy, do it because the other guy did

Two Effects of Oligopoly

1. Output effect → because the price is above marginal cost, selling 1 more unit
will raise profit
2. Price effect → Increasing production will increase the total amount sold,
overall lowering price and profit

As sellers increase Oligopolies start to look more and more like competitive markets
Prisoners Dilemma → the game with fake criminals Bonnie and Clyde
- Can be used to describe; advertising or common resources
Dominant Strategy → The strategy that is best for one player regardless of the other
player's decision

We draw like so

Controversies over Competition Policy

1. Resale Price Maintenance; is often seen as a violation of competition laws
2. Predatory Pricing; raising prices above competitive levels
3. Tying; when a company focus you to buy two of their product for you to get the one you
wanted

Chapter 21: Theory of Consumer Choice

Budget Constraint → a limit on consumption bundles that a consumer can afford

- This can be shown on the graph, essentially its opportunity cost based on limited income

Preferences
- Indifference curve; The bundle of consumption that will make the buyer equally as
satisfied
- Marginal Rate of Substitution; the rate at which a consumer is willing to trade one
good for another
- Found by the difference between two points on the same indifference curve

Four properties of the indifference curve

1. Higher indifference curves are preferred to lower
2. Indifference curves slope downwards
3. Indifference curves dont cross
4. Indifference curves bow inwards
Perfect Substitutions → two goods with straight-line indifference curves

Perfect Complements → two goods with right-angle indifference curves

Inferior good → Consumers buy less of it when their income goes up

- Ex. Pizza
Normal good →

Income effect → the change in consumption that results when a price change moves
the consumer to a higher or lower indifference curve
Substitution effect → The change in consumption that results when price change
moves the consumer along the indifference curve to a point with a new marginal
rate of substitution.

Griffen Good → a good for which an increase in price raises the quantity demanded
- It violates the law of demand