Now let’s keep income the same and vary prices. Suppose that a frost in Brazil cuts the coffee crop in half and sends the price of coffee up in the supermarket. Again, we will see a response, though not necessarily by every consumer. The quantity of coffee put into shopping carts is likely to decline, while the quantity of tea, cocoa, and other substitutes is likely to rise. Purchases of some other goods, such as cream, that are used with coffee – called complementary goods might decline. How much effect a price change will have depends upon the price elasticity of demand-that is, the percent change in the quantity demanded divided by the percent change in price.
These concepts are usually used by economists to analyze market choices, but in this book they are mostly used to analyze behavior outside conventional markets. What role has income played in increasing the proportion of adults who live alone? How has the birth rate been affected by a decrease in the cost (primarily psychic) of birth control through the introduction of the pill and intrauterine devices? Why do men now retire from work at a much younger age than they did thirty years ago? As constraints change, or as prices change, it is not surprising that people’s nonmarket behavior changes, much as their behavior in the supermarket does.