Managerial Economics

In Class Exercise Three

1.  Explain how the concept of diminishing marginal utility is related to the demand curve.

2.  Graphically show how each of the following would change the demand curve for oranges:

    a.  the price of apples increases (substitutes)

    b.  the price of grapefruit increases (complements)

    c.  the income of people increases (normal good)

    d.  the price of oranges decreases

3.  What is consumer surplus?  Show it graphically.