Answer to Question #25538 in Microeconomics for sista K

Question

Explain the theoretical link between utility price and the demand of the product.

Answer 1

People demand goods and services in an economy to satisfy their wants. All goods and services have wants satisfying capacity which is known as “UTILITY” in economics. Utility is highly subjective concept; it is different from person to person. Utility (level of satisfaction) is measured by means of introspection. By demand for goods and services economists essentially mean is willingness as well as ability of the consumer in procuring and consuming the goods and services. Thus, demand for a commodity or service is dependent upon (a) its utility to satisfy want or desire (b) capability of the prospective consumer to pay for the good or service.