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Continuous Double Auction Market Welcome!! Microeconomics is the study of how individuals and firms, assumed to be self-interested, make constrained decisions in order to make themselves as well off as possible. T helps explains now the actions to all participants in a market (buyers and sellers) determine prices and how prices influence the decisions and actions of individual buyers and sellers. It does this through the development and analysis of models.
Three Fundamental Questions Due to scarcity, people need to make trade-offs. In society these trade-offs appear as three fundamental questions: What goods and services are produced? How are those goods and services to be produced? Who gets those goods and services? Prices answer all of these important questions by influencing decision-makers. Interaction between consumers and firms takes places in markets. Models Microeconomics (and all of engineering, physics, etc. ) makes use to models to explain the relationships between various relevant quantities of interest. Ђ A simplification of reality that captures the most relevant eaters to derive meaningful conclusions.
Question: Given the marginal value function up “q, what is the quantity demanded for a given price pop ? Answer: The consumer will purchase q units so long as it provides them with positive marginal surplus, or VISP q pop . Demand Curve The marginal surplus is VISP ‘ p, where VISP ” WI FAQ. What is the quantity demanded for a given price pop ? The consumer will purchase q units so long as it provides them with positive marginal surplus, or VISP q pop . The consumer will purchase up to the point where she is indifferent between purchasing the last item, I. . , until the quantity quo such that pops q ” pop . Therefore, the marginal value function up “q and the demand function XP “q are inverses. In other words, pox q ” pops q ” pop and coop q ” expo q ” quo Consumer Surplus CSS ” wipe ‘ PC, which may be rewritten using the marginal value function up “q as q q CSS ” wipe ‘ PC ” up Pl FQDN ” apply PC del. Lampooning marginal consumer surplus Decreases and Increases in Demand An increase in demand is represented by the demand curve moving in the northeast direction. Ђ Similarly, a decrease in demand is represented by the demand curve moving in the southwest direction.