Please excuse me, I hardly know anything about economics yet.

When the quality of a product changes, the demand curve moves. But what if there are different versions of a product, of varying qualities, on the market at the same time? Is there standard way to model this?

For example, there are a lot of different restaurants of different qualities. The quality is a subjective measure, but suppose it weren't. I could draw one supply curve and one demand curve per restaurant. Is there anything more interesting I could do? For example something that takes account of the fact that a high-quality restaurant and a low-quality restaurant are to some extent substitutes for each other. Does micro theory give any prediction about what the supply of different restaurants of different qualities will be?

If there's a better question like this that I could have asked, or a good keyword to search on, please tell me.

  • 1
    $\begingroup$ I think you want to read about product differentiation, most likely about vertical product differentiation. en.wikipedia.org/wiki/Product_differentiation $\endgroup$
    – Giskard
    Nov 15 '15 at 23:06
  • $\begingroup$ @denesp thats almost a whole answer. $\endgroup$
    – Jamzy
    Nov 15 '15 at 23:14
  • $\begingroup$ @Jamzy I posted it as a comment because its main component is a link. Perhaps someone will elaborate. $\endgroup$
    – Giskard
    Nov 16 '15 at 10:04
  • $\begingroup$ Any elaboration is very welcome. $\endgroup$ Nov 16 '15 at 17:46

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