Consumer Behavior (for 2CE,Psy and Hist only)

Consumer: One that utilizes economic goods, which directly satisfy his wants or desires. The consumer is constantly faced with different choices regarding this.

Consumer Behavior: studies why consumers constantly make choices in satisfying their wants; and how they behave and decide in making their purchases.

Consumer Function: Refers to the level of consumer expenditures to national income originally believed to be constant but subsequently held to fluctuate under various conditions.

Consumer Sovereignty: The economic power exercised by the preferences of consumers in a free market.

Utility: The satisfaction that an individual would derive in consuming a good or service. This depends of course on the one who is consuming a certain good.

Utils: Unit of measurement of utility.

2 Approaches in Measuring Utility:
1.) Cardinal Approach: Measures by assigning numerical values; 1,2,3,4 and so on.
2.) Ordinal Approach: Measures in terms of rank. Highest to lowest, best to worst.

Law of Diminishing Marginal Utility:
Total Utility (TU): Refers to the total satisfaction derived from consuming specific quantities of a good.
Marginal Utility (MU): Refers to the additional satisfaction derived from consuming an additional unit of good per unit of time.

When faced by a multitude of choices, consumers may prefer some goods to others, or they may be indifferent to them.
Indifference Analysis: useful method for analyzing consumer preferences.

Close Substitutes: Product that provides an almost or equal level of satisfaction as that of the substituted good or service. A pili nut may be a close substitute for peanuts.
Weak Substitutes: Provide a weak or lower level of satisfaction as that of the substituted commodity. A bamboo pole is a week substitute for an iron bar for construction use.