Key term (why downward sloping?) buyers reservation price (willingness to pay) The largest dollar amount the buyer would be willing to pay for a good The benefits the buyer expects to receive (from having it The reservation price of the marginal buyer declines as the quantity of the good bought ncreases 6
6 Key Term (why downward sloping?) ◼ buyer’s reservation price (willingness to pay) – The largest dollar amount the buyer would be willing to pay for a good – The benefits the buyer expects to receive (from having it) – The reservation price of the marginal buyer declines as the quantity of the good bought increases
The daily demand Curve for pizza in Chicago Figure 3.1, P. 64 Exercise 3. 1. P 64 Reservation p when Qd=10k 3 Qd when P-$2.50 Demand 0 81216 Quantity(,000s of slices/day)
7 The Daily Demand Curve for Pizza in Chicago Figure 3.1, P.64 Exercise 3.1, P.64 -Reservation p when Qd=10k -Qd when P=$2.50
D vS Qd Qd Relationship A number at a given between P and Qd P a curve A point on the curve Reasons for change: Reasons for change change in factors change in P only other than p Change: a shift of the Change: a movement entire curve along the curve
8 D vs. Qd D Qd A relationship between P and Qd A number at a given P A curve A point on the curve Reasons for change: change in factors other than P Reasons for change: change in P only Change: a shift of the entire curve Change: a movement along the curve
Assumption: Other Things Equal the other things factors affecting d -price of related goods complements vs. substitutes --income: normal vs, inferior preference --expectations(prices, income,.. --population --others
9 Assumption: Other Things Equal ◼the other things: factors affecting D --price of related goods complements vs. substitutes --income: normal vs. inferior --preference --expectations (prices, income, …) --population --others
An Increase in the Quantity Demanded versus an increase in deman d Figure 3.10, Increase in quantity demanded Increase in demand 63 D 024681012 DD Quantity(,000s of cans/day) 0 12 Quantity(1, 000s of cans/day) 10
10 An Increase in the Quantity Demanded versus an Increase in Demand Figure 3.10, P.73