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Unformatted text preview: Demand: The Benefit Side of the Market Chapter 5 Law of Demand The Law of Demand states that people buy less of a good as a price rises. Stated in non-monetary terms, the Law of Demand states that people do less of what they want to do as the cost of doing it rises In other words, there are sometimes non-monetary costs to buying a good that people consider Needs and Wants Wants preferences or tastes Where do tastes come from: Biological needs Society and upbringing Popular culture Peer influence Economists assume tastes are given, fairly constant, but differ by individual Needs and Wants Needs are satisfied by achieving a bare subsistence level of consumption (food, shelter, clothing) Anything beyond this subsistence level becomes a want, not a need Economic Naturalist Why does California experience chronic water shortages? Utility Analysis Utility is the sense of pleasure, or satisfaction, that comes from consumption. Utility is subjective, so is different for each individual. Utility depends upon your tastes and preferences. Cant compare utility across people Utility Analysis Orders of Nachos Total Utility (in utils) 1 50 2 80 3 85 4 70 This chart shows the total utility derived from eating nachos one evening at the fair. Utility Analysis Total utility is the total satisfaction derived from consumption....
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This note was uploaded on 04/30/2008 for the course ECO 2306 taught by Professor Mencken during the Fall '07 term at Baylor.
- Fall '07