Coordinating
Demand and Supply
,
,P Q P Q P Q
$0 250 $12 20 $35 3
$2 200 $15 12 $40 3
$4 100 $18 8 $45 3
$6 60 $20 4 $50 3
$8 40 $25 5 $55 1
$10 30 $30 3
,WEIGHING BENEFITS, COSTS & SUBSTITUTES
Your willingness to buy a product or
service depends on your ability to pay,
comparative benefits and costs, and the
availability of substitutes.
,• Preferences
your wants and their intensities
• Demand
consumers’ willingness and ability to pay for
a particular product or service
• For any choice, what you are willing to pay or
give up depends on
– Cost
– Availability of substitutes
, SMART CHOICES ARE MARGINAL CHOICES
Key 2 states, “Count only additional
benefits and additional costs.” Additional
benefits mean marginal benefits – not total
benefits – and marginal benefits change the
circumstances.
Demand and Supply
,
,P Q P Q P Q
$0 250 $12 20 $35 3
$2 200 $15 12 $40 3
$4 100 $18 8 $45 3
$6 60 $20 4 $50 3
$8 40 $25 5 $55 1
$10 30 $30 3
,WEIGHING BENEFITS, COSTS & SUBSTITUTES
Your willingness to buy a product or
service depends on your ability to pay,
comparative benefits and costs, and the
availability of substitutes.
,• Preferences
your wants and their intensities
• Demand
consumers’ willingness and ability to pay for
a particular product or service
• For any choice, what you are willing to pay or
give up depends on
– Cost
– Availability of substitutes
, SMART CHOICES ARE MARGINAL CHOICES
Key 2 states, “Count only additional
benefits and additional costs.” Additional
benefits mean marginal benefits – not total
benefits – and marginal benefits change the
circumstances.
