When a good or service is scarce, i

When a good or service is scarce, it must somehow be rationed among competing
users. In most markets, monetary prices perform that task. But in the case of a
stand offering free ice cream, waiting time becomes the effective rationing device.
Having to stand in line is a cost, no less so than having to part with some money.
This example drives home the point that although the demand curve is usually
described as a relationship between the quantity demanded of a good and its monetary
price, the relationship is really a much more general one. At bottom, the
demand curve is a relationship between the quantity demanded and all costs—
monetary and nonmonetary—associated with acquiring a good.
Our task in this chapter will be to explore the demand side of the market in
greater depth than was possible in Chapter 3. There we merely asked you to accept
as an intuitively plausible claim that the quantity demanded of a good or service declines
as its price rises. This relationship is known as the Law of Demand, and we
will see how it emerges as a simple consequence of the assumption that people
spend their limited incomes in rational ways. In the process, we will see more
clearly the dual roles of income and substitution as factors that account for the Law
of Demand. We also will see how to generate market demand curves by adding the
demand curves for individual buyers horizontally. Finally, we will see how to use
the demand curve to generate a measure of the total benefit that buyers reap from
their participation in a market.