Chapter 4 - Chapter 4 Consumer Demand 1. Patterns of...

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Chapter 4 Consumer Demand 1. Patterns of Consumption o Consumption represents 2 out of every 3 dollars of GDP. o About 70% of a household’s budget is spent on housing, transportation, food, and health expenditures. o “Essential” items have changed from years ago. 2. Why We Purchase o The Social-Psychiatric Explanation o The Economic Explanation The ability and willingness to buy specific quantities of a good at alternative prices in a given time period, ceteris paribus. Determinants of Market Demand Tastes Income (of the consumer) Expectations (for income, prices, tastes) Other goods (their availability and prices) The number of consumers in the market. 3. Utility Theory "What is Water Worth?" Why do we waste water even though it is vital to human life? We consume so much water that additional water offers little (if any) marginal utility. "What is Diamond Worth?" Total vs. Marginal Utility More pleasure a product gives, the higher price buyers are willing to pay.
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Utility is the (expected) pleasure or satisfaction obtained from good or service. Total utility is the amount of satisfaction obtained from entire consumption of a product. Marginal utility
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This note was uploaded on 04/30/2011 for the course ECONOMICS 2201 taught by Professor Nair during the Spring '11 term at St. John's.

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Chapter 4 - Chapter 4 Consumer Demand 1. Patterns of...

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