ECO 304L Lecture Notes - Lecture 4: Demand Curve, 2 On

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23 May 2018

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3. Individual and market demand

Suppose that Kevin and Maria are the only consumers of ice cream cones in

a particular market. The following table shows their monthly demand

schedules:

Price

Kevin’s Quantity

Demanded

Maria’s Quantity

Demanded

(Dollars per

cone)

(Cones)

On the following graph, plot Kevin’s demand for ice cream cones using the

green points (triangle symbol). Next, plot Maria’s demand for ice cream

cones using the purple points (diamond symbol). Finally, plot the market

demand for ice cream cones using the blue points (circle symbol). Line

segments will automatically connect the points. Remember to plot from left

to right.

Each point on an individual’s demand curve corresponds to one of the entries

in the individual’s demand schedule. For example, when the price of ice

cream is $1, Kevin demands 8 cones per month and Maria demands 12

cones per month. Therefore, the point (8, 1) lies on Kevin’s demand curve,

and the point (12, 1) lies on Maria’s demand curve.

You can find the points of the market demand curve by adding up the

quantity demanded by each individual in the market. For example, when the

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Document Summary

Suppose that kevin and maria are the only consumers of ice cream cones in a particular market. The following table shows their monthly demand schedules: On the following graph, plot kevin"s demand for ice cream cones using the green points (triangle symbol). 2 cones using the purple points (diamond symbol). Finally, plot the market demand for ice cream cones using the blue points (circle symbol). Each point on an individual"s demand curve corresponds to one of the entries in the individual"s demand schedule. For example, when the price of ice cream is , kevin demands 8 cones per month and maria demands 12 cones per month. Therefore, the point (8, 1) lies on kevin"s demand curve, and the point (12, 1) lies on maria"s demand curve. You can find the points of the market demand curve by adding up the quantity demanded by each individual in the market.

Related Questions

1. Total and marginal utility

Alyssa enjoys eating ice cream cones. The following table contains information on Alyssa's utility from ice cream each week.

Fill in the two missing cells of the table.

Ice Cream	Total Utility	Marginal Utility
(Cones)	(Utils)	(Utils per cone)
0	0
0	0	60
1	60	60
1	60	50
2		50
2		40
3	150	40
3	150
4	180
4	180	20
5	200	20
5	200	10
6	210	10
6	210

On the following graph, use the purple points (diamonds symbol) to plot Alyssa's total utility (TU) curve if she consumes zero, one, two, three, four, five, or six cones of ice cream per week.

Note: Plot your points in the order in which you would like them connected. Line segments will connect the points automatically.

0123456240216192168145120967248250TOTAL UTILITY (Utils)ICE CREAM (Cones)

On the following graph, use the blue points (circle symbol) to plot Alyssa's marginal utility (MU) curve from consuming her first six cones of ice cream.

012345680706050403020100MARGINAL UTILITY (Utils)ICE CREAM (Cones)

For Alyssa, increasing her consumption of ice cream results in marginal utility.

rosezebra616

2. Income?Qd of Hamburger??Qd of Steak

Per month? per month?per month

Month 1?$750?8 lbs.?2 lbs.

Month 2?$950? 5 lbs.?4 lbs.

a. What is the income elasticity of demand for hamburgers?

b. What is the income elasticity of demand for steak?

c. From our study of demand in an earlier chapter, we know ___________is a normal good, whereas _______________is an inferior good.

3. Suppose the price of Butter Pecan Ice Cream has recently risen by 10% due to an increase in the cost of pecans used to make the ice cream. As a result, fewer Butter Pecan ice cream cones are being sold in the ice cream store where you work. You do some checking and find that Raspberry Chip ice cream cone sales are up 4%. What is the cross-price elasticity of Butter Pecan and Raspberry Chip ice cream cones? Are these two goods complements or substitutes?

12. If the price rises, the quantity supplied will be greater the

a. Longer the time that elapses.

b. More income elasticity is good.

c. Higher the price elasticity of demand for the good.

d. All of the above.

13. If the price elasticity of demand is -.5 and quantity demanded increases by 5%, the price must have

1. Grand TV Manufacturer wants to increase the quantity of TVs it sells by 8%. If the price elasticity of demand is 4, the manufacturer must:

a. decrease price by 1.5%.

b. increase price by 1.5%.

c. increase price by 2.0%.

d. decrease price by 2.0%.

2. Suppose that an Italian ice cream firm is facing a linear demand curve and that the current price for the Italian ice cream is set at a point where the price elasticity is 0.7. If the firm decreases the product price,

Select one:

a. the demand becomes less inelastic, and total revenue increases.

b. the demand becomes more inelastic, and total revenue decreases.

c. the demand becomes more inelastic, and total revenue increases.

d. the demand becomes less inelastic, and total revenue decreases.

3. Suppose that in a month, the price of movie rentals decreases from $3.25 to $3. At the same time, the quantity of movie rentals demanded increases from 100 to 120. The price elasticity of demand for movie rentals (calculated using the midpoint formula) is:

a. elastic.

b. zero.

c. inelastic.

d. unitary elastic.

4. The price elasticity of demand for color printers is 1.6, and you would like to see the quantity demanded of color printers increase by 32%. Then the percentage change in price should be:

Select one:

a. 15%.

b. 25%.

c. 10%.

d. 20%.

5. The price of apple increases from $1 to $1.10. At the same time, the quantity of apples demanded decreases from 100 to 90. The price elasticity of demand for apples (calculated using the initial value formula) is:

a. 0.9.

b. 0.02.

c. 1.1.

d. 1.

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ECO 304L Lecture Notes - Lecture 4: Demand Curve, 2 On

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