Basis of Demand

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Basis of Demand

Why should a consumer be willing to pay for buying a good or service? The answer is that the good that he is willing to buy satisfies his want. In other words, the good has utility for him. Utility means the want satisfying quality of a good that a person demands may not be necessarily beneficial. It may be good for his health or happiness or may be harmful or even dangerous, as are tobacco, drugs, hooch. But the good meets his needs or satisfies his wants, and thus possesses utility. And this utility or the expected satisfaction that he will get from using that good is the basis of his demand. The word ‘expected utility’ or ‘expected satisfaction’ is the reason to buy and pay the price. May be that the actual use later may not give the expected satisfaction. For the grapes he buys may turn out to be sour or mangoes prove tasteless, overripe or even foul smelling. But at the time of purchase, the person thought of sweet grapes and tasty mangoes and thus paid for it. So the demand for goods is based on their expected utility and thus a person who has no utility for a particular good will have no demand for it.


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