Chapter 6

Advanced Topics in The Theory of Demand

In this chapter we go a bit deeper in the economic interpretation of consumer demand, exploring two approaches to modeling the consumer's choices. the older approach, in terms of "utility," is taken first, and the more recent approach, in terms of "preferences," follows. The "preference" approach is the one used in more advanced economic theory and should be mastered by students who will pursue further study in economics.

Begin the chapter

You Need to Know

To understand this chapter, you will need some concepts from

Contents

  1. Introduction
  2. The Paradox of Diamonds and Water
  3. The Marginal Utility Approach
    1. Marginal Utility
    2. Diminishing Marginal Utility
    3. From Utility to Benefits
    4. Optimum Spending
    5. Another Equimarginal Principle
    6. Individual Demand
    7. Consumer Benefits
    8. Marginal Benefit
  4. Problems with the Utility Approach
  5. The Preference Approach
    1. Indifferent Alternatives
    2. A Preference Theoretic Approach to Equity
    3. Indifference Curves
    4. Optimal Spending Again
    5. Marginal Benefit and Indifference Curves
    6. Indifference Curves and Inflation
    7. An Exception to the Law of Demand?
  6. Chapter Concluding Summary

Next Chapter: Productivity and Supply.

To the list of chapters

Copyright