-expensive, do less; cheaper do more; people ALWAYS behave this way, that's why it's law
Consider: During a storm the price of milk goes up, but people buy more...still proves
Demand: any tradeoff; not just money, it can be changes in risk
ex: parachutes more stable, people jump out of planes more
Rachel's Demand Schedule for Burrito
| Price | Quantity |
| $ 0 $0.75 $1.50 $2.25 $3.00 $3.75 $4.50 | 12 10 8 6 4 2 0 |
What can we learn from this?
Values are totally subjective & contextual (belly full? age? where?)
-think of demand as a plan
P: tradeoff, opportunity costs
1) what you would have done had you not purchased it
2) can plot
When free, don't consume infinite amount
Notice, at some point, walk away, not worth it
-->Not willing or able to pay
When prices low, what does your behavior reflect?
Where price 0, use burritos fpr everthing
-eat 2 instead of 1, get more for friends, play with food
Price will tell you what service to derive
-no "correct' way to consume something (feed it to the dog or play baseball)
How do you behave as tradeoffs increase?
Give up uses of burrito lease useufl
-->weigh of value of pack of gum w/ "burrito baseball"
-force you to prioritize your wants, makes you think about everyone else
Demand curve = plot
y axis = price, x-axis = # of burritos
-relationship, downward sloping chart
-in econ, price is the given
Why do we behave this way? What learn from the chart?
1) Wealth Effects: when prices go up, you're poorer
--> will consume less
ex: Income $50 CORN EXAMOLE IN NOTES
2) Substitution availability
-more expensive, willing to purchase other stuff. Oil cheap, why bother with solar
ex: CO2 incr. fear of climate change, harm enviro, health & econ costs
--> require cost of electrictiy goes up, sort of imposes wealth effect, hurts the poor most
-raise energy prices but sucks for low income
-ppl don't care or too poor to care!
political problems tied up w/ econ; cap & trade tied in w/ welfare?
Good climate: make bad activities more expensive! incr. incentives of ppl to respond to higher prices
-->will drive less, use less heat
3) Diminishing Marginal "Utility"
-each unit you purchase of a good gives you less satisfaction than a previous one
-> first slice of pizza AWESOME..but by slice 5, awful
-when price is low, consume more, get less pleasure
-> won;t pay for 5th slice, explains why that even when price is $0, still will not consume to infinitey
What can be obtained from simple chart/
1) Marginal Values
Demand curve = plot of marginal values (at price, willing to purchase good?)
2) Total Expenditures
Pt, total spent; at $3, buy 4 ->$2
what total amnt of pleasure from consuming 4?
3) Total Value of Good
The area below demand curve up to amnt you consume
=$14.25 vs. mv $3.00
4) Buyers' Net Gains => Consumer Surplus
Put total value and expenditures together
--> know how much spend to get pleasure
-Total exp: $12
-Total value: $14.25
--> gains $2.25!!!
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