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
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