Understanding Demand and Elasticity

This lecture delves into the concept of demand, illustrating how buyers with varying willingness to pay influence market allocation. It explains how prices are set based on buyers' willingness to pay, leading to a demand function that determines the quantity buyers want at different price levels. The lecture further explores elasticity, emphasizing the importance of understanding how demand responds to price changes. Various types of elasticity, including own price, cross price, and income elasticity, are discussed, shedding light on how changes in prices and incomes impact consumer behavior. The lecture also touches on speculative products and price bubbles, highlighting the intricate relationship between price and demand.