MarginalValue - ECON 200 B Notes IV: Marginal Value Spring...

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1 ECON 200 B Notes IV: Marginal Value Spring 2010 Adapted from course notes of Haideh Salehi-Esfahani I. Postulates of Behavior A. Postulate 1 : People have preferences. B. Postulate 2 : More is preferred to less. C. Postulate 3 : People are willing to substitute between goods. II. Concept of “Value”: A. We cannot measure how much someone “likes” a good. But we can talk about how much they “value” a good. B. Marginal Value: The MV of good X is the amount a consumer is willing to give up of other goods in order to consume an additional unit of good X. C. Postulate 4: Marginal value of a good falls as the quantity consumed of the good increases. D. Total value of good X is the amount a person would be willing to give up of other goods to have all of the good X rather than have none of the good at all. III. Understanding the concept of demand and deriving the demand schedule: Example 1: Ichiro’s marginal and Total value of baseball bats (per year): Q MV($) Total Value ($)
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MarginalValue - ECON 200 B Notes IV: Marginal Value Spring...

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