Chap005.3 - Slide 16 Marginal Utility Curves for Two...

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3 Chapter 5: Demand: The Benefit Side of the Market Slide 13 Marginal Utility Curves for Two Flavors of Ice Cream (I) Pints/yr Marginal utility of vanilla ice cream (utils/ pint) Marginal utility of chocolate ice cream Pints/yr 12 200 16 100 Chapter 5: Demand: The Benefit Side of the Market Slide 14 Translating Wants into Demand ± Marginal utility vanilla/P z $12/1 = 12 utils/$ ± Marginal utility chocolate/P z 16/2 = 8 utils/$ Chapter 5: Demand: The Benefit Side of the Market Slide 15 Translating Wants into Demand ± If Sarah spends $2 less on chocolate, utils will decline by 16. ± If Sarah spends $2 more on vanilla, utils will increase by 24 ± So Sarah should buy more vanilla ± How much more? Chapter 5: Demand: The Benefit Side of the Market
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Unformatted text preview: Slide 16 Marginal Utility Curves for Two Flavors of Ice Cream (III) Pints/yr 10 250 1 10 Vanilla Price Vanilla MU = Chapter 5: Demand: The Benefit Side of the Market Slide 17 Marginal Utility Curves for Two Flavors of Ice Cream (III) Pints/yr 20 75 2 20 Chocolate Price Chocolate MU = Chapter 5: Demand: The Benefit Side of the Market Slide 18 Translating Wants into Demand The Rational Spending Rule z Spending should be allocated across goods so that the marginal utility per dollar is the same for each good. V V C C P MU P MU =...
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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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