Transcript 3.1 Demand

Demand & Utility
TOPIC: Demand & Utility
DO NOW:
 Go to the board and write how much you
would be willing to pay for each item.
DEMAND

The ability and How
willingness
paywe’re
the
do we knowtowhat
current market price for WILLING
a good/service.
to pay for something?
Define:
1) Ability,
3) market price,

2) willingness,
4) good/service.
UTILITY
The satisfaction derived from consuming a
good/service.
(It is ambiguously measured)
Desert story.
Marginal Utility:
Satiation Point:
the extra utility gained from
The point on a utility function
consuming one additionalUtility Graph
where utility is maximized.
unit of a good or service.
Utility
50
40
Disutility
30
20
10
0
-10 0
-20
1
2
3
4
# of Glasses of H2O
5
6
7
Back to the Do Now…
Would you still buy it if…
 The perfect jeans cost $1000?
 Your dream house was in war torn Iraq or
communist North Korea?
 You knew your healthcare coverage would be
revoked if you got cancer or any other long
term illness.
What’s the point?
When (perceived) utility changes, demand for
the good/service changes.
Committee Work:
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You live in NYC and have just started a new
company.
What is the name of your company?
What good/service are you making?
Why will people want to buy your good/service?
List at least 5 factors (internal & external) that
may change the perceived utility of the
product/service you offer.
How do you think the change in utility will impact
the demand for your good/service?
Present and debate this with each other.