Alchian-Allen Theorem

[magus341]

The Alchian-Allen Theorem is a lesser known but still very interesting economic theory. It states that when a fixed cost is added to substitute goods, the more expensive one becomes relatively less expensive, and so people are likely to increase consumption of the higher quality good. I think the best way to illustrate the theorem is with

Comments

[psyllogism]

Like many things in economics, this is highly enlightening. Thanks for sharing!

[magus341]

I'm glad you like it! Now that I'm done the basics, I think I'll do more stuff like this.