jan 20 lecture notes

jan 20 lecture notes - o Measuring Wants The Concept of...

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1/20/2011 Lecture Notes Shift in S and D curves: adjustment to an equilibrium o When demand curve shifts to the right and supply stays the same, then the equilibrium price will increase o When the supply curve shift to the right and the demand curves stays the same, then the equilibrium price will decrease Puzzle: Why do women spend so much money on wedding gowns that they will only where once while grooms just rent tuxedos that they could re-wear often? o More expensive for rental companies to rent out wedding dresses since people want unique dresses, the amount of times you can rent out a dress is limited where for tuxedos they are less unique so rental companies can buy more How should we allocate our incomes among the various goods and services that are available for purchase?
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Unformatted text preview: o Measuring Wants: The Concept of Utility Utility is the satisfaction people derive from their consumption activities Assumption is that people allocate their income to maximize their satisfaction or total utility Marginal Utility (MU) = change in total utility (TU) from one to the next MU/Price = Utils per Bucks, you want to maximize your utils per dollar, • MUc/Pc = MUf/Pf • MUc/MUf = Pc/Pf o If you have two individual demand curves ( like one for person A and one for person B) you add the two curves together to get the market demand curve o Consumer Surplus The difference between a buyer’s reservation price for a product and the price actually paid Net Benefit = TB – TC...
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