Answered: Market Demand Curve 12 Quenty Demanded…

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter6: Consumer Choices

Section: Chapter Questions

Problem 1SCQ: Jeremy is deeply in love with Jasmine. Jasmine lives where cell phone coverage is poor, so he can...

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Revealed Preference is when an individual's behavior reveals information about a person's tastes and preferences,i.e. what he likes and dislikes and how much he likes or dislikes a good.

The individual demand schedule and an individual's demand curve reveals a person's tastes and preferences for a good. Specifically it reveals how much each successive unit of the good he consumes is worth to him.

We can say this differently by saying the maximum price a person is willing to pay for a particular unit of the good is how much that unit of the good is worth to him. This value is revealed by his behavior or his willingness to voluntarily give a certain amount of money in exchange for that unit of the good. In other words, how many units of a good a person demands/buys at any given price. Look at the image.

Market Demand Curve
12
Quantty Demanded
Fon
Markat
Demand
Gob
Price
10
Ying
Som
Nam
Yam
10
2
2.
4.
4.
21
26
5
5
29
36
3
10
2
10
10
40
12
11
10
48
Market Demand
10
20
30
40
50
60
O The first unit of the good that Ying consumes is worth $1 to her.
The 4th unit of the good Som consumes is worth $4 to her.
The 5th unit of the good Fon consumes is worth less than $6 to her.
When the price drops from $8 to $7, Yam's demand increases from 2 to 4 units. This reveals the
3rd and 4th unit of the good she consumes are not worth $7 each to her.
Because demand st $10 is O units, no one in this market is voluntarily willing to give up $10 to
buy a unit of the good. This means that noone values consumption of the good at more than
$10 per unit.

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