Economics Mythbusters
Can we map demand preferences
into a model?
Who are the Mythbusters?
Can we map demand preferences into
a model?
• Firstly we need to answer the question what is
demand?
• Then we need to set up an experiment to see
if we can map an individuals preferences for a
good (say M+M’s) as the price changes.
What to Do:
• Set up a table with price on the left hand
column and Quantity demanded on the right.
DEMAND SCHEDULE FOR M+M's
Quantity Demanded
Price $ (per packet)
50
100
150
200
250
300
350
400
The experiment:
• An individual consumer is selected and is
given his/her income.
• They are then asked:
• How many packets would you buy if the price
was $50 a packet? $100? $150?....up to $400
• Record the results.
What does it show us?
• What happens to the quantity demanded as
the price rose?
• What would happen if we gave the consumer
more income?
• What would happen if they decided they
didn’t like M+M’s anymore?
• Is there only one person able to buy M+M’s in
reality?
Can we map a market (total) demand
for M+M’s?
• If we gave a group of consumers some income
(they are not allowed to share their income)
and attempted to map there preferences what
would we see at each price?
• How many packets would consumer one buy
at $50? Consumer two? Consumer three?
• What about at $100?, $150....up to $400.
Can we map the demand schedule as a
picture?
• Plot the schedule you have drawn on axis with
Price $ on the vertical axis and Quantity
demanded on the Horizontal.
• Connect the individual dots up until it makes a
straightish line.
• What might this line illustrate? i.e. What
happens as the price increases? When it
decreases?
The verdict: