Econ 101 - Topic 2 (Demand)

Postulates of human behavior

Postulates of human behavior

1. People have preferences - given a choice between goods, consumers can make a decision on which is preferred.

2. Preferences can and do differ across individuals - allows for trades to occur. (ex: Coke vs Pepsi)

3. More is preferred to less - all goods, not individual goods

4. People are willing to substitute one good for another - willing to make trade-offs

5. The more we have of a good, the less we value an additional unit of that good.

The Demand Schedule

Table shows how much of a good or service consumers will want to buy at different prices. Shows the quantity demanded of a good at various prices.

The Demand Curve

A curve in which graphically represents the quantity of a particular good a consumer is willing to buy at each price level. Summarizes relationships between quantity demanded of a good and the price of that good (holding all other factors constant)

True or False: No matter what the good is, we will eventually not want more of it.

True - think an all you can eat buffet.

True or False: A demand curve will not shift when your income goes up.

False. You are likely to buy more even if the price goes up - the curve shifts rightward since you can now afford more of that good.