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ASSUMPTION: An initial condition or statement that sets the stage for an analysis by abstracting from the real world. Assumptions are important to economic theories and economic analysis. Some assumptions are used to simplify a complex analysis into more easily manageable parts. These establish idealistic benchmarks that can be used to evaluate real world conditions. Other assumptions are used as control conditions that are subsequently changed to evaluate the effect of the change. The use of ceteris paribus assumptions in comparative statics analysis is an excellent example.

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Lesson Contents
Unit 1: The Set Up
  • Demand Review
  • Bring On Utility
  • Choices
  • Unit 1 Summary
  • Unit 2: A Simple Choice
  • One Good
  • Demand For A Good
  • Unit 2 Summary
  • Unit 3: Complex Choices
  • Two Goods
  • How Much Of Each?
  • A Short Cut?
  • Income And Prices
  • Rule Of Consumer Equilibrium
  • Unit 3 Summary
  • Unit 4: On To Demand
  • A Generalized Choice
  • A Price Change
  • Marginal Utility Curve
  • Unit 4 Summary
  • Unit 5: Beyond Demand
  • Many Choices
  • Demand Elasticity
  • Market Supply
  • Unit 5 Summary
  • Course Home
    Utility and Demand

    This lesson undertakes a detailed investigation into the decision-making process underlying the purchase of goods and services. Doing so provides a behind-the-scenes examination of market demand, offering an explanation for the inverse relation between demand price and quantity demanded that is the law of demand.

    • The first unit of this lesson, The Set Up, begins with a review of the market demand and consumer demand theory.
    • In the second unit, A Simple Choice, we examine the decision-making process for purchasing a single good.
    • The third unit, Complex Choices, then complicates matters slightly by adding a second good into the decision making mix.
    • The fourth unit, On To Demand, presents the rule of consumer equilibrium that captures the essence of this decision-making process and how it helps explain the law of demand.
    • The fifth unit and final unit, Beyond Demand, explores how consumer demand theory provides insight to noneconomic choices, demand elasticity, and market supply.

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    PROFIT

    Generally speaking, the difference between revenue received by a firm for production and cost incurred in the production, or the excess of revenue over cost. Three specific notions of profit exist, each with a different meaning. Accounting profit is the difference between revenue and accounting cost. Economic profit is the difference between revenue and total opportunity cost. Normal profit is opportunity cost of entrepreneurship. Profit is occasionally used synonymously with the term rent, or economic rent.

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    APLS

    YELLOW CHIPPEROON
    [What's This?]

    Today, you are likely to spend a great deal of time waiting for visits from door-to-door solicitors looking to buy either a handcrafted bird feeder or a New York Yankees baseball cap. Be on the lookout for slightly overweight pizza delivery guys.
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    This isn't me! What am I?

    On a typical day, the United States Mint produces over $1 million worth of dimes.
    "When you play, play hard; when you work, don't play at all. "

    -- Theodore Roosevelt, 26th US president

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    Minimum Lending Rate
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