ECO-4 Lecture Notes - Lecture 11: Marginal Cost, Comparative Advantage, Demand Curve
Document Summary
Marginal benefit : value of one more unit. Measure benefit by maximum price that is willingly paid for another unit of the good or service. Individual demand : price of a good & the quantity demanded by one person. Market demand: relationship between the price of a good & the quantity demanded by all buyers. Horizontal sum of the individual demand curves. Formed by adding quantities demanded by individuals @ each price. Marginal benefit entire society : marginal social benefit. Market demand curve = marginal social benefit curve (msb) Excess of benefit received from a good over the amount paid for it. When people buy something for less than it is worth to them. Value of a good minus price paid for it. The area under the demand curve and above the price paid, up to the quantity bought. Supply cost curve = marginal cost curve.