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chapter 3 - willing to pay for a good or service Example...

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Consumer Choice: Individual and Market Demand Usually, individual demand curve is negatively sloped. Why? i. Diminishing of marginal utility ii. Substitution and income effect Utility: a tool to analyze purchase decisions Buy the quantity of each good at which price and marginal utility are exactly equal Consumer surplus: the difference between what you are paying and how much you are
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Unformatted text preview: willing to pay for a good or service Example: you are going to purchase one pair of shoes for $100, but you are offered two pairs of shoes for $150. The seller is obviously wiling to sell each pair for $50, but rather than take $100 for two, they establish a price threshold which allows the buyer to actually pay more: $150 for two ($75/each) rather than $100 ($50/each)....
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