1. What is Best?

2. How do we determine Price(BEST)?

3. Satisfaction experienced using a product or service.
Utility
Satisfaction experienced using a product or service.
  

4. You mean, the more I buy the happier I’ll be?!?!
 
Not Exactly!

9. Quantity
Marginal Utility
Total Utility 1 2 3 5 6 7 8

10. Diminishing Marginal Utility
The marginal benefit from using each additional unit of a good or service during a given time period tends to decline as each is used.

11. Demand
Desire +
Ability
= Demand
$$Price$$
Quantity Demanded

12. Law of…
Demand
As prices people will buy
drop
more.
As prices people will buy
rise
less.

13. Demand Curve

14. Why does Demand work this way?
1) Income Effect:
Change in the amount you will buy because of the purchase power of your income.
2) Substitution Effect:
Change to the amount purchased because you can buy something similar but different.

15. What’s the difference?

16. Goods that consumers demand less of as their incomes rise.
Inferior Goods:
Goods that consumers demand more as their incomes rise.
Normal Goods:

17. Goods or Services that can be used in place of others.
Substitutes:
When the use of one product increase the use of another.
Complements:

18. Change in Quantity Demanded
A movement along a given demand curve caused by a change in demand price. The only factor that can cause a change in quantity demanded is price.

19. Change in Demand
A shift of the demand curve caused by a change in one of the factors of demand. A change in demand is caused by any factor affecting demand EXCEPT price.

20. Supply Willingness + Ability = Supply $$Price$$ Quantity Supplied 700
3500
600
3000
500
2000
300
1500
200
100

21. Producers are willing to sell…
Law of…
Supply
Producers are willing to sell…
for a price
and
for a price.
More
Higher
Less
Lower

22. Supply Curve