1.2. Who is the woman in the coat? Recently, one of the authors of this textbook was walking in Central Park in New York City. Because it was lunchtime and she was hungry, she decided to indulge her secret passion for good old-fashioned hot dogs. She did this frequently, so she was well aware that the standard price for a hot dog in New York City was $1.50. She was surprised when she handed the vendor $2 that she received no change back. As it turned out, the price of a hot dog inside the park was $2.00, not the $1.50 vendors charged elsewhere in the city. Since she was trained as an economist, she wanted to know what caused the difference in price.

First, she looked to the demand side of the market. If hot dogs are selling for $2.00 in the park but only $1.50 outside the park, people must be willing and able to pay more for them in the park. Why? Perhaps hot dogs are more enjoyable to people when eaten while walking through Central Park. Hot dogs and

“walking through the park” may be complementary goods or maybe people who walk in the park at noon are richer.

You might ask, if hot dogs are available outside the park for

$1.50, why don’t people buy them there and bring them to the park? The fact is that hot dogs are good only when they are hot, and they get cold very quickly. A hot dog purchased five minutes away from Central Park will be stone cold by the time someone reaches the park.