Consumer Behavior

Customers use many products that give them pleasure or satisfaction. Utility refers to the measure of satisfaction or well-being that a consumer derives …

Consider a girl riding her motorcycle under the hot sun, feeling thirsty. Spotting a gas station, she buys a bottle of water. This first bottle of water …

Total utility, or TU, is the overall satisfaction with the consumption of all units of a product. Consider the utility that John gets from eating pizzas …

Consumer preferences are based on a few assumptions that help simplify consumer behavior. A market basket or a bundle refers to a combination of goods and …

The study of consumer behavior is based on a few assumptions regarding consumer preferences. The assumption of transitivity means that a customer's …

An indifference curve is a graphical representation of a consumer's preferences. A consumer is indifferent among different combinations of two …

Nancy loves coffee and sandwiches. Her preferences for various combinations of coffee and sandwiches consumed weekly are represented in IC1. It gives her …

Suppose indifference curve IC1 represents John's preferences for weekly consumption of goods X and Y. Now imagine another indifference curve IC2, …

The marginal rate of substitution, or MRS, is the rate at which a consumer is ready to give up one product in exchange for another while maintaining the …

Marginal Rate of Substitution, or MRS, measures the amount of one good that a consumer can sacrifice in order to gain an additional unit of another good …

Indifference curves are usually convex to the origin due to the diminishing marginal rate of substitution. However, the shape of indifference curves …

Budget constraint helps to describe the combinations of products a consumer can afford to buy with their limited income. For instance, a student receives …

The slope of the budget constraint represents the rate at which a consumer can trade one product for another. For example, a student spends his weekly …

A Budget constraint or budget line represents the various combinations of two products a consumer can purchase, given their income and the prices of …

A budget constraint or budget line is affected by a change in the income of the consumer. For instance, a student receives a weekly allowance of $100 that …

Consumer choice involves selecting a combination of products as a market basket, or a product bundle. The chosen bundle should provide the highest level …

Consumer choice involves selecting a bundle that provides the highest level of satisfaction to the consumer under the constraints of their budget. The …

The optimal bundle that gives maximum satisfaction to a consumer lies at the point where the budget line touches the highest possible indifference curve. …

When the price of a product changes, it affects the consumption behavior of the consumer. This change in consumption is called the price effect or the …

When the price of a product changes, it affects the consumption behavior of the consumer. This change in consumption is called the total effect, which is …

When the price of a good changes, the consumer purchases a different optimal bundle of the two goods in response to the price change. Each time the price …

The price consumption curve shows how the optimal bundle changes with the change in prices of one good. For example, the student changed their purchase of …