HBS CORe Economics for Managers
Module 1: Foundation of Customer
Demand
Why is a benchmark important? - ANS For firms to know if they are pricing well they neeed to
compare to something
WTP (willingness to pay) - ANS The maximum price you are willing to pay
What is a price above your WTP considered? - ANS An irrational decision
Are price and WTP the same? - ANS Not at all
How to start comparing pricing to other firms - ANS Start w/ your own WTP then see why
exactly your WTP differs from others.
Does a price of $1 mean a WTP of $1? - ANS It means a WTP of at least a $1
Extrinsic - ANS Things you can determine w/o asking (Age,Gender,Income, Education)
intrinsic - ANS Someones risk tolerance, passion (past behavior can help determine intrinsic
factors)
What is the relationship determine Market Value of a company and WTP? - ANS If no new
shares are issued then they are equal
What does the rectangle under the demand curve represent? - ANS Revenue
What are some factors the 'SHIFT' the demand curve? - ANS Factors: Income, Gender,
Geography, Weather, Age, Service Levels, Brand, Advertising, Competing Projects,
Expectations
What does not shift the demand curve? - ANS price
Why does the individual demand curve look like? - ANS It is downward sloping
What is diminishing marginal returns? - ANS The more you sell the harder it becomes to sell,
this is why the demand curve slopes downward; it also equates to max size a company can
grow
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