Derivation of. The Demand Curve. Preview of 4 Coming Attractions. Today: Derivation of the Demand Curve Consumers ( Buyers ) Next: Derivation of the Supply Curve Firms ( Sellers ) Later: Double Auction Market Buyers and and sellers come together
Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.
The Demand Curve
Ratio of marginal utilities equals ratio of prices for any two goods
(MUG/MUB) = (PG/PB)
Explanation of Diamond Water Paradox
First pointed out by Adam Smith
The consumer chooses an amount such that the marginal benefit (MB) equals price (P)
When I see a demand curve, I think of the marginal benefit to consumers
WGAD: Why do economists put the quantity on the horizontal axis?
Willingness to pay is usually greater than the price
for example my willingness to pay for a pair of eyeglasses is much more than the price
Consumer surplus is the area under the demand curve and above the price
Consider all consumers in the market
Add up quantity demanded by all individuals at each price to get market demand