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251Ch3lecture2Notes

# 251Ch3lecture2Notes - – Slope =-2 – y-intercept is(0 12...

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8/28/2011 1 1 Chapter 3: Demand and Supply Lecture 2: Demand as marginal benefit Ch3: Demand and Supply Lecture 2: Demand as marginal benefit 2 Slope-Intercept form Rewrite a linear demand equation in slope-intercept form Slope-intercept form is y = mx + b, where m = slope and b = y coordinate of the y- intercept Ch3: Demand and Supply 3 Demand in slope-intercept form Demand equation: Q d = -(1/2)P + 6 Slope-intercept form of the equation: P= -2 Q d + 12 Slope = -2
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Unformatted text preview: – Slope = -2 – y-intercept is (0, 12) Interpreting slope-intercept form of demand • P= -2 Q d + 12 • Given a unit of output, what is the highest price someone would pay? • Willingness to pay = marginal benefit (MB) Demand as MB Q d (boxes per month) P (\$) 6 5 2 4 4 3 6 2 8 1 10 12 MB of 3 rd box = \$6 MB of 2 nd box = \$8 MB of 5 th box = \$2 Declining marginal benefit • As quantity increases, marginal benefit falls...
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