BUSS1040 Lecture 3: Lecture 3 (ch6&9) - Demand, Market Equilibrium & Welfare

• School: University of Sydney
• Department: Business Studies
• Course: BUSS1040
• Professor: Katrien Stevens

Document Summary

Lecture 3 (ch6&9) - demand, market equilibrium & Consumer behaviour = demand for goods & services. In economics we examine consumer behaviour assuming each consumer tried to maximize their well-being or the benefit he or she gets from consuming goods and services, subject to their budget constrain (trade-offs) First we consider competitive markets (where the choices of individual consumers do not affect the price in the market - consumers are price takers) A consumer derives some benefit from consuming a particular good or service. The benefit a consumer gets is their willingness to pay (wtp) When a consumer buys multiple units of a good, important to distinguish between total and marginal benefit. e. g. candice"s willingness to pay for coffee is for the first cup, for the second and for the third. Her total benefit for the three cups is . Her marginal benefit (mb) measures how much extra benefit she derives from consuming an additional cup.