Chapter 5

Introduction to The Theory of Demand

In this chapter we explore the basis of the demand relationship from the point of view of a rational consumer's choice: how much to spend on each good or service. This will be useful in relating demand to other aspects of economics, including benefit-cost analysis. The chapter concludes with a cost-benefit application, an outline of a benefit-cost analysis of the introduction (a few years ago) of a new good, the video-cassette recorder.

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Contents

  1. Introduction
  2. Benefits and Costs
  3. Measuring Benefits
  4. Marginal Benefit
  5. Maximum Net Benefit
  6. Marginal Benefit and Demand
  7. The Fundamental Principle of Consumers' Demand
  8. Consumers' Surplus
  9. Demand and Cost-Benefit Example: The Introduction of the VCR
  10. Chapter Summary

Next Chapter: Advanced Topics in The Theory of Demand.

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