Demand Basics: Understanding Willingness to Pay and Market Dynamics

This lecture introduces the fundamental concepts of demand in economics, focusing on the willingness to pay and its determinants. The instructor begins by defining the basic building blocks of economic analysis, emphasizing the interaction between supply and demand. The discussion highlights how buyers decide to purchase items based on their maximum willingness to pay, illustrated through relatable examples such as buying coffee. The instructor elaborates on various factors influencing willingness to pay, including personal needs, product quality, peer pressure, and budget constraints. The lecture also addresses the allocation of goods in limited supply, debating criteria such as willingness to pay, need, and merit. The instructor explains the implications of market economies where goods are often allocated to the highest bidder, raising questions about fairness and the impact of wealth on access to essential items. The session concludes with a reflection on the balance between market dynamics and the need for regulation to ensure equitable access to vital resources.