econ101111 - Microeconomics Oct. 11th, 2011 Aggregate...

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Microeconomics Oct. 11th, 2011 Aggregate Demand Curves and Shifting Demand Aggregate demand curves are not the same as the sum of individual curves. Big Ideas As individuals, we would buy less when prices go up to find a quantity where our individual marginal utility = the new, higher price. But in a social context, what we buy is influenced by others. At higher prices, we may buy more to impress others (Veblen effects) or because higher prices signal higher quality (Price signals) We may buy more to join the crowd (stampedes and fads) or because we want the convenience of fitting in (network economies). Changes in any of these, in preferences, income, the price of complements or substitutes changes the amount bought at any price, moving the demand curve. How do we react when prices rise? Orthodox: MU and downward sloping demand curves: We buy less until our MU equals the new, higher price. Real World: Social demand
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This note was uploaded on 04/04/2012 for the course ECON 103 taught by Professor Voorheis during the Fall '08 term at UMass (Amherst).

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econ101111 - Microeconomics Oct. 11th, 2011 Aggregate...

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