ECON_2306 => Lecture 3 Slides

Demanded demand d individual versus market demand

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Unformatted text preview: ionship between the price of a product and the quantity of the product demanded. demanded. Demand D. Individual versus market demand Transition from an individual to a market demand schedule is accomplished by summing individual quantities at various price levels. Market curve is horizontal sum of individual curves curve is horizontal sum of individual curves Demand schedule A table table showing the relationship between the price of a product and the quantity of the the product demanded. 13 Principles of Microeconomics Principles of Microeconomics 14 Example Individual Demand and Market Demand Deriving the Market Demand Curve from Individual Demand Curves Market demand The The demand for a product by all all the consumers in a given given geographical area. If If there are three consumers in a market, how can market market demand be obtained? a. By adding the prices that consumers are willing By that consumers to to pay for a given quantity of output. b. By adding the quantities that consumers are By willing to purchase at a given price, for various price price levels. c. By adding both the prices and the quantities By adding both the ices and the quantities that that consumers are willing to pay for and purchase. purchase. d. By dividing the quantity demanded in the By quantity demanded market market by three. 15 Principles of Microeconomics Principles of Microeconomics 16 4 If If there are three consumers in a market, how can market market demand be obtained? a. By adding the prices that consumers are willing By that consumers to to pay for a given quantity of output. b. By adding the quantities that consumers are By willing to purchase at a given price, for various price price levels. c. By adding both the prices and the quantities By rices that consumers are willing to pay for and purchase. purchase. d. By dividing the quantity demanded in the By quantity demanded market market by three. Demand B. Law of demand is a fundamental characteristic of demand behavior. Other things being equal, as price increases, the corresponding quantity demanded falls. is an inverse relationship between price and There is an inverse relationship between price and quantity demanded. The “other-things-equal” assumption refers to consumer income and tastes, prices of related goods, and other things besides the price of the product being discussed. 17 18 Principles of Microeconomics Principles of Microeconomics When When analyzing the relationship between the price of a good and quantity demanded, other variables must be held constant. Which term best describes such such an assumption? a. The law of demand. b. The substitution effect. c. The income effect. d. The term ceteris paribus. The term ceteris paribus When analyzing the relationship between the price of a good and quantity demanded, other variables must be held constant. Which term best describes such such an assumption? a. The law of demand. b. The substitution effect. c. The income effect. d. The term ceteris paribus. The term ceteris paribus 19 Principles of Microeconomics Principles of Microeconomics 20 5 Demand Explanation of the law of demand Diminishing marginal utility: The decrease in added satisfaction tha...
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