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Fifth Edition
Economics
A Contemporary Introduction
William A. McEachern
Consumer Choice and Demand
1
Exhibit 1: Utility You Derive from Water
After Jogging Four Miles
Units of Water
Consumed
(8-ounce glass)
Total Utility
Marginal Utility
0
0
—
1
40
40
2
60
20
3
70
10
4
75
5
5
73
–2
Consumer Choice and Demand
2
Exhibit 2a: Total Utility You Derive
from Water After Jogging Four Miles
Total utility
80
60
40
20
0
1
Consumer Choice and Demand
2
3
4
5
Glasses (8-ounce)
3
Marginal utility
Exhibit 2b: Marginal Utility You Derive from
Water After Jogging Four Miles
40
20
0
1
Consumer Choice and Demand
2
3
4
5
Glasses (8-ounce)
4
Exhibit 5: Demand for Pizza Generated
from Marginal Utility
a
Price per pizza
$8
b
6
4
2
0
D
1
Consumer Choice and Demand
2
3
4
Pizzas per week
5
Exhibit 6: Consumer Surplus from
Subway Sandwiches
Price per Subway
$8
7
6
5
4
3
2
1
D
0
1
Consumer Choice and Demand
2
3
4
5
6
7
8
Subways
per month
6
Exhibit 7a: Summing Individual Demands
to Derive the Market Demand for
Subway Sandwiches
(b) Brittany
Price
(a) Alan
$6
$6
4
4
2
2
0
dY
2
4
Consumer Choice and Demand
6 Subways
per month
0
dB
2
4
7
Exhibit 7b: Summing Individual Demands
to Derive the Market Demand for
Subway Sandwiches
(c) Chris
$6
$6
4
dA + dB + dC = D
4
2
0
(d) Market demand for Subways
dC
2
Consumer Choice and Demand
2
0
2
6
12
8
Price per unit
Exhibit 8: Market Demand and
Consumer Surplus
$2
D
1
0
Consumer Choice and Demand
Quantity per period
9
Video rentals per week
Exhibit 9: An Indifference Curve
10
8
a
5
4
3
2
0
Consumer Choice and Demand
b
c
d
1 2 3 4 5
I
10
Pizzas per week
10
Video rentals per week
Exhibit 10: An Indifference Map
10
5
I4
I1
0
Consumer Choice and Demand
5
I2
I3
10
Pizzas per week
11
Video rentals per week
Exhibit 11: Indifference Curves
Do Not Intersect
k
j
i
I'
I
0
Consumer Choice and Demand
Pizzas per week
12
Video rentals per week
Exhibit 12: A Budget Line
10
5
0
Consumer Choice and Demand
–pp –$8
= –2
=
Slope =
$4
pv
5
10
Pizzas per week
13
Video rentals per week
Exhibit 13: Utility Maximization
10
a
5
4
e
I1
0
Consumer Choice and Demand
3
5
I2
I3
10
Pizzas per week
14
Exhibit 14: Effect of a Drop
in the Price of Pizza
(a)
Videos per week
10
5
4
e"
e
I"
I
(b)
Price per pizza
0
$8
6
e
e"
D
0
Consumer Choice and Demand
3 4 5
7
Pizzas per week
3 4 Pizzas per week
15
Video rentals per week
Exhibit 15: Substitution and Income
Effects of a Drop in the Price of Pizza
from $8 to $4
10
C
5
4
e*
e
I*
e'
I
0
3 4 5
Substitution
effect
Consumer Choice and Demand
F
10
Pizzas per week
Income
effect
16