Chapter 3 Appendix Outline
A. Assumptions of Consumer Behavior
1. Economists believe in the principle of consumer sovereignty
a. Underlying this principle is the assumption that consumers know their wants and how to satisfy them.
2. Economists believe that consumers attempt to maximize the benefit received from the consumption of goods and services.
a. The benefit consumers expect to receive is expressed through their buying behavior.
1. The benefit expected from consuming a good must be at least as great as the expected opportunity cost.
3. The demand schedule is a table showing how the quantity demanded changes as price changes, holding all other factors that affect demand constant.
a. This schedule shows the marginal benefit of a good.
1. Marginal benefit is the maximum price that an individual will pay foran additional unit of a good.
b. According to the schedule, marginal benefit will fall as additional units of a good are consumed.
c. The demand schedule can be used to find consumer surplus.
1. Consumer surplus is the difference between marginal benefit, expressed in dollars, and the price actually paid for a good.
2. Consumer surplus can be interpreted as the gain from trade.

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