CHAPTER 2 Demand: Thinking Like a Buyer
Some decisions are sweeter than others.
Scientists have identified a part of the brain that fires up every time you evaluate a possible buying decision. Think about how busy that part of your brain must be. Every time you look at a menu, a price tag, or an advertisement, it fires up, asking: Is this a good deal? Should I buy? If so, how many? Sometimes the answer is no, you shouldn’t buy. Sometimes the answer is yes, and you’ll make a purchase—perhaps a $1 cookie. And sometimes you’ll make a life-changing decision such as choosing to buy a car or a house. But collectively, even the small decisions add up to a big deal—they’re a large chunk of the millions of dollars you will probably spend over your lifetime.
In this chapter, we’ll develop a deeper understanding of demand—the decisions that we make as buyers. We’ll start by studying individual demand, zooming in and focusing on the decisions that you make as an individual consumer trying to decide how much of a product to buy. We’ll apply the core principles of economics that we developed in Chapter 1 to guide you toward making better buying decisions.
Next we’ll pan back and analyze market demand, which managers use to project how much of a product the market as a whole will buy at each price. Because total market-wide demand is simply the sum of the individual demand choices made by millions of buyers, you’ll find that your deeper understanding of individual demand will help you better understand market demand. We’ll then explore how changing market conditions shift market demand.
By the end of this chapter, you’ll understand the key factors that drive the millions of purchasing decisions that underpin much of our economy. Let’s get started.