Chap003.3 - Demand 8 12 16 The buyers reservation price The largest dollar amount the buyer would be willing to pay for a good 4 2 3 Chapter 3

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3 Chapter 3 - Supply and Demand: An Introduction Slide 13 Buyers and Sellers in Markets ± The Income Effect z The change in the quantity demanded of a good that results because a change in the price of a good changes the buyer’s purchasing power. Chapter 3 - Supply and Demand: An Introduction Slide 14 Buyers and Sellers in Markets ± The Cost-Benefit Principle z The reservation price is the benefit the buyer receives from the good. z The cost of the good is its market price. z If the reservation price (benefit) exceeds the market price (cost) the consumer will purchase the good. z At higher prices, benefit will exceed cost for a smaller quantity than at lower prices. Chapter 3 - Supply and Demand: An Introduction Slide 15 Buyers and Sellers in Markets Price ($ per slice) Quantity (1000s of slices per day)
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Unformatted text preview: Demand 8 12 16 The buyers reservation price: The largest dollar amount the buyer would be willing to pay for a good 4 2 3 Chapter 3 - Supply and Demand: An Introduction Slide 16 Buyers and Sellers in Markets Horizontal Interpretation Price determines quantity demanded Price ($ per slice) 4 2 3 8 12 16 Demand Chapter 3 - Supply and Demand: An Introduction Slide 17 Buyers and Sellers in Markets Vertical Interpretation Quantity measures the marginal buyer’s reservation price Price ($ per slice) 4 2 3 8 12 16 Demand Chapter 3 - Supply and Demand: An Introduction Slide 18 Buyers and Sellers in Markets ± The Supply Curve z A curve or schedule showing the quantity of a good that sellers wish to sell at each price....
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This note was uploaded on 02/20/2012 for the course ECON 202 taught by Professor Brightwell during the Spring '08 term at Texas A&M.

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