lecture_4 - Lecture 4: Demand and supply Demand (consumer)...

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ECON 1001 Lecture 4 1 Lecture 4: Demand and supply Demand (consumer) - utility, marginal utility - marginal benefit (and diminishing marginal benefit) - consumer surplus Supply (producer) - costs, revenue, profit - marginal cost - producer surplus
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ECON 1001 Lecture 4 2 Typical Demand Curve Quantity Demanded Price Demand curve Demand curve Fig 5.1
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ECON 1001 Lecture 4 3 Utility A numerical indicator of a person’s A numerical indicator of a person’s preferences in which higher levels of preferences in which higher levels of utility indicate a greater preference utility indicate a greater preference
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ECON 1001 Lecture 4 4 Marginal Utility The additional utility gained from The additional utility gained from the consumption of an additional the consumption of an additional unit of a good unit of a good MU MU X = = TU / TU / Q Q X
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ECON 1001 Lecture 4 5 Cups of Cups of Coffee Coffee Utility from Utility from Coffee Coffee Marginal Marginal Utility Utility 0 0 1 1 2 2 3 3 4 4 5 5 Utility Example: Coffee 0 0 11 11 20 20 26 26 30 30 32 32 - - 11 11 9 9 6 6 4 4 2 2
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ECON 1001 Lecture 4 6 Bottles of Bottles of Water Water Utility from Utility from Bottled Water Bottled Water Marginal Marginal Utility Utility 0 0 1 1 2 2 3 3 4 4 5 5 Utility Example: Water 0 0 20 20 36 36 44 44 48 48 50 50 - - 20 20 16 16 8 8 4 4 2 2
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ECON 1001 Lecture 4 7 Utility 0 5 10 15 20 25 30 35 0 1 2 3 4 5 Cups of Coffee per Day Utility Utility Utility Cups Cups 0 0 1 1 2 2 3 3 4 4 5 5 0 0 11 11 20 20 26 26 30 30 32 32
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ECON 1001 Lecture 4 8 Marginal Utility Fig 5.3 0 2 4 6 8 10 12 0 1 2 3 4 5 Cups of Coffee per Day Marginal Utility Marginal Marginal Utility Utility Cups Cups 0 0 1 1 2 2 3 3 4 4 5 5 - - 6 6 4 4 3 3 2 2 1 1
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ECON 1001 Lecture 4 9 Diminishing Marginal Utility The decline in additional utility The decline in additional utility from consumption of an from consumption of an additional unit of a good as additional unit of a good as more and more of the good is more and more of the good is consumed consumed
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ECON 1001 Lecture 4 10 Marginal Benefit The increase in the benefit from, The increase in the benefit from, or the willingness to pay for, one or the willingness to pay for, one more unit of a good more unit of a good
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ECON 1001 Lecture 4 11 Quantity Quantity Willingness Willingness to Pay to Pay Marginal Marginal Benefit Benefit 0 1 2 3 4 5 Marginal Benefit $0.00 $5.00 $8.00 $9.50 $10.50 $11.00 - $5.00 $3.00 $1.50 $1.00 $0.50
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ECON 1001 Lecture 4 12 Individual Demand Curve: Restricted Fig 5.17 0 1 2 3 4 5 6 0 1 2 3 4 5 6 Quantity Demanded  Dollars
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ECON 1001 Lecture 4 13 Market Demand Curve Fig 5.19 + + = = 0 1 2 3 4 5 6 0 1 2 3 4 5 Price Quantity Pete’s Pete’s Demand Demand Curve Curve 0 1 2 3 4 5 6 0 1 2 3 4 5 Price Quantity Ann’s Ann’s Demand Demand Curve Curve 0 1 2 3 4 5 6 0 1 2 3 4 5 6 7 8 9 10 Price Quantity Market Market Demand Demand Curve Curve
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ECON 1001 Lecture 4 14 Typical Market Supply Curve Fig 6.1 Quantity Supplied Price Supply Curve Supply Curve
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ECON 1001 Lecture 4 15 Applying the Central Idea of Economics
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This note was uploaded on 11/06/2011 for the course ECMT 1010 taught by Professor Vadimtimovsky during the Three '10 term at University of Sydney.

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lecture_4 - Lecture 4: Demand and supply Demand (consumer)...

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