The demand curve, Managerial Economics

Assignment Help:

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:

623_demand curve.png

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.


Related Discussions:- The demand curve

Oligopoly, Explain the classification of oligopoly?

Explain the classification of oligopoly?

Explain managerial decision-making, Question 1: (a) Describe how asymme...

Question 1: (a) Describe how asymmetric information influences the price system and resource allocation. Provide examples to support your answer. (b) Managerial decision-ma

Explain the demand for a commodity, Explain the demand for a commodity ...

Explain the demand for a commodity The functional relationship between demand for a commodity and its various determinants may be expressed mathematically in terms of a demand

Explain the tastes of the buyer must not alter, Tastes of the buyer must no...

Tastes of the buyer must not alter Any alteration which takes place in the taste of consumers will in all probability thwart the working of the law of demand. It frequently hap

International trade, INTERNATIONAL TRADE Definition It is the exc...

INTERNATIONAL TRADE Definition It is the exchange of goods and services between one country and another.  International Trade can be in goods, termed visibles or in servi

Disadvantages of perfect competition, Disadvantages of Perfect Competition ...

Disadvantages of Perfect Competition There is a great deal of duplication of production and distribution facilities amongst firms and consequent waste. Economies of sc

Term paper, I have a research paper that is due, my schedule is so full tha...

I have a research paper that is due, my schedule is so full that I need assistance due to overload are you interested in the research paper? course - managerial economics TEXT: Man

The results of the hypothesis test, Use the data set cd costs2010 to estima...

Use the data set cd costs2010 to estimate the marginal cost of one more CD. (Regress costs on the number of CDS.) Test the hypothesis that the marginal cost equals 75 cents. How wo

Ppf, What is producer surplus? “The more the competition among the sellers,...

What is producer surplus? “The more the competition among the sellers, the less the producer surplus enjoyed by the producers” – do you agree with the statement. Justify your answe

Types of income elasticity of demand, Types of Income Elasticity of demand ...

Types of Income Elasticity of demand Depending upon the product, demand might increase or decrease in response to a rise in income.  There are thus five types of income Elasti

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd