blanchard_ch03

The table in fig 31 is the demand schedule for energy

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: l other influences on consumers’ planned purchases remain the same. The table in Fig. 3.1 is the demand schedule for energy bars. A demand schedule lists the quantities demanded at each price when all the other influences on consumers’ planned purchases remain the same. For example, if the price of a bar is 50¢, the quantity demanded is 22 million a week. If the price is $2.50, the quantity demanded is 5 million a week. The other rows of the table show the quantities demanded at prices of $1.00, $1.50, and $2.00. We graph the demand schedule as a demand curve with the quantity demanded on the x-axis and the price on the y-axis. The points on the demand curve labeled A through E correspond to the rows of the demand schedule. For example, point A on the graph shows a quantity demanded of 22 million energy bars a week at a price of 50¢ a bar. The Demand Curve FIGURE 3.1 Price (dollars per bar) 56 6/22/09 3.00 E 2.50 D 2.00 C 1.50 B 1.00 Demand for energy bars A 0.50 0 5 15 20 25 10 Quantity demanded (millions of bars per week) Quantity demanded Willingness and Ability to Pay Another way of look- Price ing at the demand curve is as a willingness-and-ability-to-pay curve. The willingness and ability to pay is a measure of marginal benefit. If a small quantity is available, the highest price that someone is willing and able to pay for one more unit is high. But as the quantity available increases, the marginal benefit of each additional unit falls and the highest price that someone is willing and able to pay also falls along the demand curve. In Fig. 3.1, if only 5 million energy bars are available each week, the highest price that someone is willing to pay for the 5 millionth bar is $2.50. But if 22 million energy bars are available each week, someone is willing to pay 50¢ for the last bar bought. (dollars per bar) (millions of bars per week) A 0.50 22 B 1.00 15 C 1.50 10 D 2.00 7 E 2.50 5 A Change in Demand When any factor that influences buying plans other than the price of the good...
View Full Document

Ask a homework question - tutors are online