Chapter3 slides

Chapter 3: Demand in a

Perfectly Compe66ve Market

© Playconomics, LHS

1

Demand Curve for an Individual

• 2

:

-­‐ soda (
)
and other goods (

-­‐ total budget of $4

)

Think at the margin!

Should Isa buy the 1st can of soda?

© Playconomics, LHS

2

Demand Curve for an Individual

Defini6ons:

U6lity represents the saFsfacFon that an individual derives from consuming a given good or taking a certain acFon. It is measured in u"ls per unit of "me.

© Playconomics, LHS

3

Demand Curve for an Individual

Defini6ons:

Decreasing Marginal U6lity captures the fact that the uFlity from consuming an the extra unit of a given good decreases with the number of units that have been previously consumed.

© Playconomics, LHS

4

Demand Curve for an Individual

≥

<

GO! Take the ac6on Don’t take the ac6on © Playconomics, LHS

5

Demand Curve for an Individual

Cost-­‐Benefit Principle:

The Cost-­‐Benefit Principle states that an acFon should be taken if the marginal benefit is greater than the marginal cost.

© Playconomics, LHS

6

Demand Curve for an Individual

Quan66es Demanded

© Playconomics, LHS

7

Demand Curve for an Individual

Defini6on:

The Quan6ty Demanded by a