# Individual Consumers Representation on the Demand Curve

I recently watched an educational video titled “Understanding the Demand Curve: Shifts and Consumer Surplus”. In the video, individual consumers were associated with specific points on the demand curve. For instance, a consumer 1 who values the product more (in this case, oil) was represented by a point of low quantity and high price. Conversely, a consumer who values the product less (“Joe”) was represented by a point of high quantity and low price.

This representation seems counterintuitive to me. The association of the value a consumer places on a product with specific points on the demand curve (determined by quantity and price) seems misleading. One of my main concerns is: why is a point representing a high quantity and a low price (around 90 units for just over 20 dollars, Joe) considered as a consumer who values oil less? After all, couldn’t the same consumer 1 have this behavior?

Here is the link to the video for reference: video

• Value - I do not think it means what you think it means. Commented Mar 17 at 2:14

I recently watched an educational video titled “Understanding the Demand Curve: Shifts and Consumer Surplus”. In the video, individual consumers were associated with specific points on the demand curve.

That's a poor characterization of the video. Better would be that the demand curve is being used to associate individual consumers with particular units sold, based on the maximum price the consumer is willing to pay. Yes, there is a particular point on the demand curve characterizing each such association, but that's secondary -- a function of the choice of consumer and their willingness to pay.

The objective is to explain a graphical interpretation of aggregate consumer surplus as the area bounded by the y axis, the demand curve, and a horizontal line at the actual price. You can imagine a bar for each consumer, one unit wide, as long as the difference between the actual price and the maximum price they are willing to pay. Their individual consumer surplus is the area of that bar. If you line up such bars next to each other, for each consumer who buys, from maximum willingness to pay to minimum, then together they fill up the area in question.

Depending on your math background, that construction may remind you of a Riemann sum. That would by no means be accidental.

This representation seems counterintuitive to me. The association of the value a consumer places on a product with specific points on the demand curve (determined by quantity and price) seems misleading

I don't see why. Each consumer has a maximum price for the product. That connects them to a point on the demand curve.

One of my main concerns is: why is a point representing a high quantity and a low price (around 90 units for just over 20 dollars, Joe) considered as a consumer who values oil less? After all, couldn’t the same consumer 1 have this behavior?

Perhaps the subtlest part of the analysis is that an alternative, but equivalent, interpretation is being applied to the x axis. The conventional interpretation is quantity sold, but you can also interpret it as representing individual units sold, or as the incremental effect of the xth unit sold. Perhaps it makes more sense to you to associate one of those with an individual consumer.

• For things that people need, perhaps a better interpretation is what they are able to pay? So then you are just measuring how adequately people are paid vs their actual needs? Not a good look. Commented Mar 17 at 2:11
• @ScottRowe, although ability to pay is one factor in willingness to pay, it is by no means the only factor. For most products, under most circumstances, I don't think the two are even all that strongly correlated. So no, I don't think the y coordinate of a demand curve graph admits the reinterpretation you propose, and I certainly do not accept it as a better interpretation. Commented Mar 17 at 2:26
• I'm not sure what point you're trying to make here, @ScottRowe. I agree that having less money to spend makes things harder, and that having very little money can make life very hard indeed. But I don't see how that's related to this answer other than in the most general of senses. Commented Mar 17 at 3:02
• Making the assumption that people are rational but not realizing that their options might be very limited leads to a poor model of human behavior and bad economic predictions. Commented Mar 17 at 12:46
• I didn't invent the model, @ScottRowe, and I'm not interested in debating it's strengths and weaknesses. It is an utterly standard model taught in every introductory Microeconomics course, and it serves as essential foundation material for the video the OP asked about. Any good answer would need to explain the video in terms of that model, regardless of how well you think it reflects real human behavior. Commented Mar 17 at 15:32

You have to look at the 'marginal'/small changes in the demand function. At some price, e.g. 1 billion dollars, you have a demand of zero. Then you keep decreasing this price until demand jumps to one. At the price of the jump, you have your first consumer, they can be mapped to this (price,quantity) pair. No other consumer can be, because they are not buying at that price.

Then you keep decreasing the price, until the quantity demanded jumps again, to e.g. two. This (price,quantity) pair can be mapped to your second consumer. Now we are not saying that they buy two units, just that they buy the second unit (or however many units high the jump was). This point does not really correspond to other consumers: the first consumer buys at a higher price already, so they do not buy the second unit, and no other consumers buy at this price.

And so on, you can keep decreasing the price and mapping (price,quantity) pairs at jumps to consumers.

• My indignation is because the video says that Joe, represented by this point (high quantity x small price) values oil less. Can we say that this representation is correct just because he bought a lot of oil at a low price? It seemed very vague to me, I would perhaps need to look at other elements to say that Joe values oil less.
– Fam
Commented Mar 16 at 8:29
• I think it's meant to be a market demand curve, which means Joe doesn't necessarily want the whole amount, unless he's the only one who wants oil. Joe wants oil at 20 dollars, but he's unwilling to pay more. Also, this isn't the whole story, because you need a market supply curve to see what the eventual price will be. Commented Mar 16 at 8:42
• @Fam Hi! So I have read your question, but I don't want to watch the video - it takes time and external links go against the SE philosophy. If you want to include more details, you can take screenshots and add them to your question. Commented Mar 16 at 9:14
• @Fam Having said that, the video may be bad. If "Joe" represents a sudden jump, he alone is responsible for a large quantity then the setup is unfortunate. Are you sure the reason that the quantity is large is not that it includes other consumers and Joe? (I cover this in my answer.) In either case, it is still fair to say that Joe values a unit of oil less because he only start purchasing at a lower price. Commented Mar 16 at 9:16
• @ScottRowe Your point is that how much someone "values" something is conflated with how much they can and are willing to pay for it. I agree that this is bad framing depending on the context; I dislike it when they argue that the market results in an efficient allocation because of this. Unfortunately it is a very universal framing. Commented Mar 17 at 6:21

If the market price of oil is 20 dollars, then a person willing to pay 55 dollars values oil more than the (rest of the) market, i.e. more than (some) other people. If the price were 55 dollars, there would be fewer buyers in the market, because some people are only willing to pay less than 55 dollars. If price increases from 20 dollars to 55 dollars, the quantity demanded will drop from 25 barrels of oil to just 5 barrels of oil.

• 500 is more than 275, so why would they raise the price so much? (Dollar signs don't format correctly here?) Commented Mar 17 at 2:01
• @ScottRowe I'm sorry I don't understand your comment. What is 500 and 275 and which price rise are you referring to? Commented Mar 17 at 7:59
• Selling 20 barrels at 25 is 500, yes? And 5 at 55 is 275. So, would you rather bring in 500 dollars, or raise your price to the point that you bought in half as much? Commented Mar 17 at 12:40
• @ScottRowe It's a market demand curve, not a market supply curve. To model market supply, you'd need another curve in this graph, which would typically be upward sloping. Market equilibrium (equilibrium price and equilibrium quantity) is where they intersect. Commented Mar 17 at 13:18