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2. 4
Section 1
Understanding Demand
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3. What is Demand?
Demand is the willingness and ability of buyers to purchase different quantities of a good, at different prices, during a specific time period. Type equation here.
Quantity demanded (∆ QD) = price change
Change in demand (∆D) = outside variables
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4. What Does the Law of Demand “Say”?
The law of demand tells us what happens to the quantity demanded when the price changes.
Indirect relationship
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5. Why Do Price and Quantity Demanded Move in Opposite Directions?
Why does the law of demand work the way it does?
Economists say it is because of the law of diminishing marginal utility.
The law of diminishing marginal utility states that as a person consumes additional units of a good, the utility gained for each additional unit decreases.
Diminishing simply means declining or decreasing. Whatever we are talking about, if it is diminishing, it’s going down. Marginal is the economist’s word for additional. If we are at a certain point, and then we add more, the more is marginal. Utility means that something has value or use to us, that the something gives us satisfaction.
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6. Exhibit 4-1 from the Student Text
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