Microeconomics

Where does the demand curve come from? In order to explain why individuals choose different quantities at different prices, we will use a model with three components:

Perfect Competition

So far, we have discussed how the consumers make their decisions, and what the producers’ production possibilities and cost of production look like. The consumers often take prices as given and choose quantities based on the prices. The question is how prices arise. One factor is, of course, the cost of production.