ECON1101 Chapter Notes - Chapter 5: Reservation Price, Marginal Utility, Network Effect
12 Nov 2020
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Topic 5 - demand: the benefit side of the market. Demand - the benefit side of the market. As discussed in topic 3 the demand curve is the relationship between quantity demanded and all costs (price). The law of demand states that people do less of what they want to do as the cost of doing it rises. Origins of demand: tastes/preferences are a determinant of the consumers reservation price (biological, shaped by culture, either stable (food) or volatile (fads, peer influence (social factors, network effects, reservation prices may increase as users of the good increases. [1] utility measures the satisfaction people get from the consumption of a good or service: rational people will allocate income to achieve maximum utility, marginal utility - the change in utility from an additional unit of the good. This example [2] demonstrates these concepts. please note the marginal utility is meant to be between the rows.
