ECON 1110 Lecture Notes - Demand Curve, Marginalism
Document Summary
The theory of consumer choice can be used to provide a theoretical underpinning to the belief that a demand schedule slopes downwards. Additionally you will gain an understanding to: marginal analysis. The history behind this is as follows: basically, ppl are concerned about the relationship btwn price and value. There were some concerns, however, one such concern was the famous diamond and water paradox. This riddle posed the question: water is a good we value very highly but its price is low. We don"t need diamonds to survive but their price is very high. Relative scarcity is resp. for this price difference however, the question asks why price and value negatively correlate. Theory of marginal and total utility analysis begins by assuming. Satisfaction, or utility, can be measured in cardinal terms, using #s (utils) increasing consumption of a good adds to tu, but every extra unit of the good consumed gives increasingly smaller amounts of utility.
