Demand Price Setting

Abstract

This study describes the specifics of demand price setting. At the end of the chapter, you will be able: - to define the main characteristics of the cardinal approach to utility analysis, to determine the main analytical factors and to calculate the optimal structure of individual purchases for a fixed revenue structure and real market prices - to describe the main tool for analysing customer preferences of the ordinal theory – the indifference curve; to analyse the main characteristics of the ordinal approach and customer reactions to changes of the ratio between their income and the supply prices - based on observations of customer behaviour to determine the specific demand characteristics and the degree of utility maximisation. The study includes the following sections: 1. Quantitative (cardinal) approach to utility and demand analysis 2. Defining the utility function based on ordinary utility hypotheses. 3. Customer preferences depending on market price levels.