Demand

Demand analysis - intuition Marginal Cost/Marginal Benefit analysis of consumers If Marginal Benefit > Marginal Cost, buy it If Marginal Benefit < Marginal Cost, don’t buy it Marginal Benefit is reflected by what consumer is willing to pay. Marginal Cost is price of item.

Demand for Adam Humphrey’s Visa Service (based on individual’s willingness to pay) Depends on, Price of Service Individual’s Income Price Associated with Doing it at Burger King How much does the person really want to go to China or how big a hassle is it to come back. Number of Individuals going to Chinese Consulate for visa.

Demand for Adam Humphrey’s Visa Service

Market Demand for Adam Humphrey’s Visa Service Obtained by summing all individual demands. Depends on, All factors that affect individuals’ demands (price of service, income, price of related goods, tastes/preferences, expectation of future prices, etc.) Number of Individuals (population)

Individuals Can Demand Multiple Units

Demand = Willingness to Pay Consumer Surplus (The value consumers get from a good but do not have to pay for.) P=35

Demand Function for Good X QDx = f(Px, PY, M, H1 , H2, …) where, Px is the price of good X, PY is the price of good Y, M is income, H1 is size of population, H2 is consumers’ expectations,… On the prior graph for Adam Humphrey’s Service, QDx=50-Px