. Advertisement .
. Advertisement .
Hi everyone,I’m back here. I have found a very interesting article. This article will help you add knowledge about “Why is the demand curve referred to as a marginal benefit curve?“. Don’t forget to look at this helpful content!
What is marginal benefit? Why is the demand curve referred to as a marginal benefit curve?
Marginal benefit is the benefit which we get through the consumption of one extra unit of any good or service. The demand curve shows the willingness to pay for an additional unit of the good or service, so it is equal to the marginal benefit of that good. Therefore, the demand curve is referred to as the marginal benefit curve.
Let’s read the following example to understand more:
Today,it is a nice, warm and sunny day .Three friends are on a walk, they see an ice cream shop and decide to go into to have ice cream. Now, they don’t know how much it is because they haven’t been there before. Here’s some information about each of them to just show how much they are willing to pay, how much benefit they think they’re gonna get from this one scoop of ice cream. A person , they’re like an ice cream. It is a sunny day to the army for something refreshed. Something cold on that they’ve not had icing recently. So that is a zero to represent the number of asking have had recently. With all the information, we can engage that the benefit they’re gonna get from this one. Person be the same factors apply, except they have had a nice cream. Before they came out, they had one ice cream recently, so their benefits are going to be less than a person . Because they’ve had once, they’re not really craving it as much. Therefore,we’re gonna put by for medium now. See, this in factors, except they’ve had to buy schemes recently. So they’re going to be craving ice cream even less, because, they’ve had some already, so we’re gonna put out rubs it low. This is the benefit that big engaged that they kind of assume they’re going to get from, you know, they’re about to purchase. So this is introducing an economic term known as marginal benefit. The definition is Marshall benefit of the three additional utility the additional benefit the consumer gets from consuming one more unit off a good or service. In this case, that’s ice cream. How much do they really get benefit from purchasing that one unit of ice cream? No,the marginal benefit for person a consuming the scoop of ice cream is gonna be the highest. Because , you know, all these reasons that we’ve mentioned, on since they are getting the most martial benefit from it, they’re gonna be willing to pay more for it, it’s gonna mean they more like if we say they use it for a while,so he’s really craving. It’s gonna mean more to this person than the others, so they could be willing to pay the most for it. Let’s say that person is willing to pay a maximum of 10 for that skip. You know, they’re getting less benefit from it. They’re willing to pay 5 for this unit ice cream. Their essentially marginal benefit is a representative of how much they are willing to pay for that one extra unit of ice cream or it can be any good service. So let’s pick this in a graph.Dollars for how much you want to pay on quantity here. At 8 person , you know, is basically gauging that they are willing to enter this market. If you’ve got 5 ,this is the only point where person see thinks the price is worth the benefit. At that price, everyone has entered that market because they think that is a reasonable price in exchange for the benefit they’re going to get from that ice cream on the sunny day like today. This demand curve can also be referred to as the marginal Baffert curve, because your willingness to pay for an amount for the you know of a good or service is equal to the marginal benefit that you are expecting to get from it. Therefore, the demand curve is referred as the marginal benifit curve.
......... ADVERTISEMENT .........
......... ADVERTISEMENT .........
How does the demand curve represent the marginal benefit curve, and the supply curve represent the marginal cost curve?
The demand curve represents the marginal benefit curve because a consumer’s willingness to pay for the next unit of a good is equal to the marginal benefit that the consumer expects to receive from that unit of the good. The area under the demand curve shows the willingness to pay.
The supply curve represents the marginal cost curve because a supply curve shows the changes in the quantity due to a price change. In the short run, variable factors can change to increase the supply. The firm will supply at a price which covers the cost. Therefore, the price charged by the firm will be equal to or greater than the average variable cost. Thus, the supply curve is the raising portion of the marginal cost over and above the minimum average cost curve.
Above is the solution of “Why is the demand curve referred to as a marginal benefit curve?“. If you have good solutions or comments, please leave a message.
Leave a comment