Chapter4 - Part 2

# Chapter4 - Part 2 - Individual and Market Demand Chapter 4...

This preview shows pages 1–9. Sign up to view the full content.

Individual and Market Demand Chapter 4

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
Chapter Outline Individual Demand Income and Substitution Effects Market Demand Consumer Surplus
Willingness to Pay (WTP) A buyer’s willingnes s to pay for a good is the maximum amount the buyer will pay for that good. WTP measures how much the buyer values the good. name WTP Anthony \$250 Chad 175 Flea 300 John 125 Example: 4 buyers’ WTP for an iPod

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
Willingness to Pay (WTP) Derive the demand schedule: 4 J ohn, Chad, Anthony, Flea 0 – 125 3 Chad, Anthony, Flea 126 – 175 2 Anthony, Flea 176 – 250 1 Flea 251 – 300 0 nobody \$301 & up Q d who buys P (price of iPod) name WTP Anthony \$250 Chad 175 Flea 300 John 125
Willingness to Pay (WTP) P Q d \$301 & up 0 251 – 300 1 176 – 250 2 126 – 175 3 0 – 125 4 P Q

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
Willingness to Pay (WTP) P Q At any Q , the height of the D curve is the WTP of the marginal buyer , the buyer who would leave the market if P were any higher. Flea’s WTP Anthony’s WTP Chad’s WTP J ohn’s WTP
Consumer Surplus Cons umer s urplus is the amount a buyer is willing to pay minus the amount the buyer actually pays: CS = WTP P

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
Consumer Surplus and the Demand Curve P Q Flea’s WTP P = \$260 Flea’s CS = \$300 – 260 = \$40 Total CS = \$40
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

### What students are saying

• As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

Kiran Temple University Fox School of Business ‘17, Course Hero Intern

• I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

Dana University of Pennsylvania ‘17, Course Hero Intern

• The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

Jill Tulane University ‘16, Course Hero Intern