This assignment shows how the demand curve can be derived by the utility maximum principle. To get this answer the author will firstly define the main issues out of the top-ic. The result is that for theoretical models like the demand curve or the utility maximum principle it is necessary to have perfect markets with perfect marketers. These perfect marketers are the so called homo oeconomicus which act rational and compare every possible opportunity with their opportunity costs to get the optimal benefit by a given income and a defined price. At least with the help of the budget line which charts the available income and the indifference curve which describes the optimal demanded unit of a good bundle, the demand curve can be derived.
Inhaltsverzeichnis (Table of Contents)
- Executive Summary
- Table of Contents
- List of Abbreviations
- List of Figures
- Introduction
- Problem Definition
- Objectives
- Methodology
- Theoretical Background: Definitions and Explanations
- Supply, Demand and how Markets Establish: A short Introduction
- The Demand on Economical Markets and its Influencing Factors
- Utility Maximum Principle
- Utilitarianism and the Welfare
- Utility Function
- Economical Principle
- How the Demand Curve can be derived from the Utility Maximum Principle
- Results and Conclusion
Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)
This assignment aims to demonstrate how the demand curve can be derived from the utility maximum principle. It examines the concept of perfect markets, including the role of the "homo oeconomicus," and utilizes the tools of the budget line and indifference curves to illustrate the relationship between income, prices, and consumer demand.
- The concept of perfect markets and their role in economic modeling.
- The behavior of rational consumers ("homo oeconomicus") and their decision-making processes.
- The relationship between utility maximization and consumer demand.
- The use of budget lines and indifference curves to visualize and analyze consumer choices.
- The derivation of the demand curve from the utility maximum principle.
Zusammenfassung der Kapitel (Chapter Summaries)
- Introduction: This chapter introduces the assignment's purpose, outlining the problem of deriving the demand curve from the utility maximum principle. It also establishes the methodology and objectives of the study.
- Theoretical Background: Definitions and Explanations: This chapter delves into the theoretical foundations, defining key concepts such as supply, demand, and the utility maximum principle. It explores the influence of factors on demand in economic markets and provides a comprehensive understanding of the utility maximum principle, including utilitarianism, utility functions, and the economic principle.
- How the Demand Curve can be derived from the Utility Maximum Principle: This chapter presents the core of the assignment, demonstrating how the demand curve can be derived using the utility maximum principle. It utilizes the tools of budget lines and indifference curves to illustrate the relationship between income, prices, and consumer choices, ultimately deriving the demand curve through graphical representation.
Schlüsselwörter (Keywords)
This work focuses on the key concepts of perfect markets, "homo oeconomicus," utility maximization, budget line, indifference curves, and the derivation of the demand curve. It explores the relationship between consumer behavior, economic principles, and the theoretical model of the demand curve.
Frequently Asked Questions
How is the demand curve derived?
The demand curve is derived through the utility maximum principle, using tools like the budget line and indifference curves to find the optimal consumption point.
What is the "homo oeconomicus"?
The homo oeconomicus is a theoretical model of a rational actor who compares every opportunity with its opportunity costs to maximize benefit within a given income.
What is an indifference curve?
An indifference curve describes combinations of goods that provide the same level of utility to a consumer.
What does the budget line represent?
The budget line charts the available income and shows all possible combinations of goods a consumer can afford at defined prices.
What are perfect markets in economic theory?
Perfect markets are theoretical models where buyers and sellers have perfect information and act rationally to establish market equilibrium.
- Quote paper
- Diplom-Kaufmann (FH) Johann Gross (Author), 2013, How can the Demand Curve be derived from the Utility Maximum Principle?, Munich, GRIN Verlag, https://www.grin.com/document/266629
