BPUB250 Spring 2008 - Chapter 4 - Individual and Market Demand

BPUB250 Spring 2008 - Chapter 4 - Individual and Market Demand

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Chapter 4 – Individual and Market Demand First, we derive the demand curve for an individual consumer. The quantity of a good demanded varies in response to price changes as we move along an individual’s demand curve. The demand curve shifts in response to changes in the individual’s income. We will study the effects of a price change. First, when the price of a good goes up, the consumer will buy less of it and more of other goods due to the good now being more expensive relative to the prices of other goods. Second, the good’s higher price reduces the consumer’s purchasing power. This is like a reduction in income and will lead to a reduction in consumer demand. Individual demand curves can be aggregated to determine the market demand curve. Market demand curves can be used to measure the benefits that people receive when they consumer products, above and beyond the expenditures they make. Network externalities
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This note was uploaded on 04/17/2008 for the course BPUB 250 taught by Professor Seim during the Spring '08 term at UPenn.

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BPUB250 Spring 2008 - Chapter 4 - Individual and Market Demand

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