Question:
What two dimensions does a market consist of?
Author: Hjalmer PedersenAnswer:
A market contains two dimensions: 1. Product dimension - close substitute or complementary products in consumption and production • Substitutes in consumption: large and positive CED • Complements in consumption: large and negative CED • Substitutes in production: large and negative CES • Complements in production: large and positive CES 2. Geographic dimension - change in a product’s price in one geographic location significantly affects the price in another location • Local regional, national, continental, or global • Spatial cross-price elasticities can be used
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