Translating Wants into demand ● Assumption o People allocate their income to maximize their satisfaction or total utility Chapter 5: Demand: The Benefit Side of the Market Slide 11
MB MC Chapter 5: Demand: The Benefit Side of the Market Slide 11 Translating Wants into Demand ⚫ Assumption ◆People allocate their income to maximize their satisfaction or total utility
Sarah's Total Utility from Ice Cream Consumption Cone quantity(cones/hour) Total utility(utils/hour) 0 0 50 90 3 120 140 5 50 6 140 How much ice cream should sarah consume if the ice cream is free? Chapter 5: Demand: The Benefit Side of the Market Slide 12
MB MC Chapter 5: Demand: The Benefit Side of the Market Slide 12 Sarah’s Total Utility from Ice Cream Consumption Cone quantity (cones/hour) Total utility (utils/hour) 0 0 1 50 2 90 3 120 4 140 5 150 6 140 How much ice cream should Sarah consume if the ice cream is “free”?
Sarah's Total Utility from Ice Cream Consumption 120 50 0 3 5 6 Cones/hour Chapter 5: Demand: The Benefit Side of the Market Slide 13
MB MC Chapter 5: Demand: The Benefit Side of the Market Slide 13 Sarah’s Total Utility from Ice Cream Consumption Cones/hour Utils/hour 0 1 2 3 4 5 6 150 140 120 90 50
Translating Wants Into demand a What should sarah do when she gets to the front of the line? a What do you think? o Is the time spent in the line relevant to how many cones to order? Chapter 5: Demand: The Benefit Side of the Market Slide 14
MB MC Chapter 5: Demand: The Benefit Side of the Market Slide 14 Translating Wants Into Demand ◼ What should Sarah do when she gets to the front of the line? ◼ What do you think? ⚫ Is the time spent in the line relevant to how many cones to order?
>r Sarah's Total Utility and Marginal Utility from Ice Cream Consumption Cone quantity Total utility Marginal utility (cones/hour) (utils/hour) (utils/cone) 0 50 0123456 50 40 90 30 120 20 140 10 150 10 140 Chapter 5: Demand: The Benefit Side of the Market Slide 15
MB MC Chapter 5: Demand: The Benefit Side of the Market Slide 15 Sarah’s Total Utility and Marginal Utility from Ice Cream Consumption Cone quantity Total utility Marginal utility (cones/hour) (utils/hour) (utils/cone) 0 0 1 50 2 90 3 120 4 140 5 150 6 140 50 40 30 20 10 -10 __