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theory of consumer behaviour - Coggle Diagram
theory of consumer behaviour
utility= wants satisfying power of a commodity
legal/moral(tobacco)
utility is not usefulness(tobacco,yoga)
varies with person(white shirt)
consumer surplus=willing to pay-actual price(Golu)
Marginal utility=how much extra willing to pay for additional unit & what's the change in TU?
meaning=wants
desire(car)
effort(hard work)
features of wants
unlimited
differ in urgency(pen before exam vs game)
satisfy in alternate ways(thirst= water, cola, milk..)
affected by income/taste/fashion
become habit(teaching online) & custom(turban)
vary with place & time(50yrs back no pen)
satiable(all cant be satisfied 100%)
affected by social norms
types of wants
comfort(furniture/sofa)
luxury(AC/expensive watch)
neceessities(food)
equilibrium= pt of max satisfaction for consumer/ no shift
MU analysis/ Alfred Marshall/Cardinal Approach/Utility in no's(cricket=thirty=water=10,will to pay=30utiles
Ordinal/Hicks & allen
Limitations of CS
necessities/MU=infinite
substitutes(shirt less-tshirt more)
not possible to measure
MU=Money(Not in cardinal)
diminishing marginal utility(DMU)
consumption declines with every additional unit
Law of DMU
TU peak, MU=o
TU falls, MU -ve
TU rises, MU falls
1st product, mu=tu
limitations
dependent
utility of one dependent on availability of other
unreliable assumptions
always rationale
no change in taste
conditons for equilibrium
2 commodity world(MUx/Px=MUy/Py)
one commodity world(Px=MUx)
assumptions of Law of DMU
Cardinal(No's)= football, water, will to pay
continuity in consuption(no breaks)
Money's MU constant
standard units(spoon vs glass of water)
Consumer rationale/logical
other factors remaining constatnt(price, taste,income all no change, else consumer will purahse more or less)
advantages of CS
Large scale investment
value of consumer welfare
Setting prices
raising prices
exceptions where utility keeps rising, it does not apply to?
money as a commodity
habits(tobacco)
hobbies(artwork)
gold(buy)