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Lecture 3

ECON 225 Lecture 3: Econ 225 Chapter 3
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2 Pages
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Department
Economics (Arts)
Course Code
ECON 225
Professor
Guillaume Lord

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Description
Econ 225 Chapter 3 DEMAND  Willingness to pay is determined by individual values and ability to pay  A demand curve shows all the different quantities of a good and the willingness to pay of consumers for them.  As seen on the graph the willingness to pay decreases as the number of goods increases  Marginal willingness to pay describes the additional willingness to pay of a person for one more unit of a good/service  Total willingness to pay for a given consumption level refers to the total amount a personal would be willing to pay to attain that consumption level rather than go without the good entirely. It is the area under the WTP curve for the given level. (ex would be the blue + green area for consumption level q)  Willingness to pay is the demand curve  The general equation for a demand curve is Qd=intercept-slopeP  Inverse demand curve is P=intercept/slope-(1/slope)Qd  Aggregate demand curve is the horizontal summation of the demand curves of all the people typically grouped by geographical region. How to aggregate a demand curve: Write out equations for both and add: Alice: Qd=10-2P Bruce:Qd=5-p Aggregate demand: Qd=15-3p Inverse of which is P=5-1/3Q  Benefits are measured by willingness to pay  Therefore total ben
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