B200.F09.W03.D.S.R1.PP

B200.F09.W03.D.S.R1.PP - BUAD 200 Week 3.R1 The functioning...

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BUAD 200 Week 3.R1 The functioning of Markets: The interaction of buyers and sellers. (Chapter 4)
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Review Review Economic competition Economic competition: We compete for goods by offering to trade $ dollars. Circular flow diagram Circular flow diagram: Shows the interaction of households and firms in two kinds of markets.
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Product Markets FIRMS HOUSEHOLDS Resource Markets $'s $'s Revenue $'s Income $'s Services Services Resources Inputs Circular Flow Diagram of the Exchange Economy
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NEW: Study of Markets NEW: Study of Markets Markets Markets are the interaction of buyers and sellers. Some markets are local, some worldwide. Focus on buyers and sellers separately: Separate graphs for each group. Ceteris paribus : look at one thing at a time; All other things held equal.
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Marginal Value Marginal Value Focusing on a buyer, we measure the personal marginal value of a good as the most $’s you are willing to give up to acquire an additional unit. (How much you are willing to trade) Graph the marginal value as a height above each additional unit per time period.
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Marginal Value Declines Plot the marginal value as a height above additional units. As you have more of any good, the marginal value declines.
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Marginal Value = The Most you are willing to pay for each additional unit 0 10 20 30 40 50 60 70 80 1 2 3 4 Marginal Value
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MVx Qty x /T $ 10 $ 9 $ 8 $ 7 $ 6 $ 5 $ 4 $ 3 $ 2 $ 1 1 2 3 4 5 6 7 8 9 10 Marginal Value The height above each additional unit = the most you are willing to pay Marginal Value
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B200.F09.W03.D.S.R1.PP - BUAD 200 Week 3.R1 The functioning...

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