ECON 310 Lecture Notes - Lecture 3: Inverse Demand Function, Graph Labeling, Aggregate Demand
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9 Jan 2018
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Your willingness to pay for pizzas on a weekly basis is given by mwtp = 30 2*q. This provides the basic information about how you value pizzas. Based on this information, calculate the following. (i) draw a properly labeled graph for the mwtp equation. See fig 1 on the last page. (ii) find mwtp when the number of pizzas consumed is 6. Mwtp = 30- 2(6) =18 (iii) find quantity of pizzas consumed at which mwtp = 16. 16 = 30 - 2q implies q = 7 (iv) find total wtp for 6 pizzas. Find area under mwtp graph from q=0 to q=6. (v) find total benefits you get from consuming 6 pizzas. Total benefits and total wtp implies the same thing. When you make choices to maximize your utility or happiness, the rule you follow is to set p =