ECON 2010 Lecture Notes - Lecture 8: Equilibrium Point, Consumer Choice, Marginal Utility

• School: CU-Boulder
• Department: Economics
• Course: ECON 2010
• Professor: Zacharyszlendak

Document Summary

Although supply and demand can be expressed on same graph and we can find their equilibrium, there are important differences. Demand is decided by consumers who are trying to maximize their own wellbeing in reference to a particular market: consumer choice theory, exception: labor markets. Supply is decided by producers, who are trying to maximize profit: producer theory. Upplie(cid:396)s do(cid:374)"t ha(cid:448)e p(cid:396)efe(cid:396)e(cid:374)ces as (cid:373)uch as they ha(cid:448)e othe(cid:396) p(cid:396)ofit oppo(cid:396)tu(cid:374)ities. With supply, curvature is more likely to reflect some aspect of the production process. If a supply curve is curved upwards, it might mean the producer finds it very difficult to make more units after a certain point. Inputs are the resources a supplier uses to make outputs in the production process: ex. labor hours, raw materials, time, electricity, effort, also called factors of production. Law of demand is more intuitive to most of us: all else equal, if the price of a good drops, we buy more of it.