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The demand curve
Suppose that starting from a condition of equilibrium, the price of X falls relative to Y. We now have a condition where the utility from the last shilling spent on X will be greater than the utility from the last shillings spent on Y. Mathematically this can be written as:
In order to restore the equilibrium the consumer will buy more of X (and less of Y), thus reducing the marginal utility of X. The consumer will continue substituting X for Y until equilibrium is achieved. Thus we have attained the normal demand relationship that, ceteris paribus, as the price of X falls, more of it is bought. We have therefore a normal downward-sloping demand curve. The demand curve we have derived is the individuals' demand curve for a product. The market demand curve can be then obtained by aggregating all the individual demand curves.
The explanation we have obtained here is of the price (or substitution) effect.
Compare the price elasticity at two parallel demand curves at a given price. This has been explained in Fig above where two demand curves AB and CD are given that are parallel to e
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p=10, TC= 1000+2Q+.01Q^2, Q=?
Discuss the full cost pricing and marginal cost pricing method. Explain how the two methods differ from each other.
Consumer Demand is how much of something that consumers are wanting. A company requires to know the consumer demand so they know how much of a product to build.
What is advertising elasticity? Explain
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