StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...

Modern Microecon, Consumer Theory - Essay Example

Comments (0) Cite this document
Summary
Consumer theory primarily relates to consumer choice, where consumer choice is a microeconomics theory that links the preferences over consumption of goods and services to the expenditure entitled to these and hence, to consumer demand curves. Given the law ‘ceterus paribus’ of economics, a typical consumer demand curve shows, with all other factors constant an individual will consume more of a good or a service when its price falls and lesser of it if the price rises…
Download full paper File format: .doc, available for editing
GRAB THE BEST PAPER96.8% of users find it useful
Modern Microecon, Consumer Theory
Read Text Preview

Extract of sample "Modern Microecon, Consumer Theory"

Download file to see previous pages In raw economic terms, utility is a measure of consumer satisfaction, that is, how much satisfaction a consumer derives from the consumption of a good or a service. Budget constraint on the other hand represents the combination of goods or services an individual can consume or purchase in consideration to given prices with his or her limited income. Combining the two concepts forms the foundation of consumer theory. The utility theory provides a methodological framework whereby usually, all individuals, organizations and firms evaluate given options. Utility is a term used to describe the satisfaction that each of the given options provide to the one making the decision. Hence, the basis of the utility theory is that each individual will choose that option which tends to maximize utility, working on what is called the ‘maximization principle’. This principle states that the most desirable choice is the one with the highest level of satisfaction. However, while making these decisions, the individual must also consider his income earned along with the respective prices of the goods and services in question. ...
Total utility continuously rises as consumption increases. This rise becomes smaller as more units of a product are consumed, it can also decline after a certain level of consumption. On the other hand, marginal utility measures the change in consumption benefit as a result of consuming one more or one less unit of a product. In other words, marginal utility tracks the change in total utility as the number of units consumed changes. The behavior of marginal utility is such that it tends to fall continuously as consumption of a product increases. This is because the first few units consumed of a product provide a higher level of satisfaction than the later few. For example, the first drink of water is worth a lot more to a thirsty individual than his seventh one. For a consumer to be in equilibrium certain conditions need to be met. The consumers are assumed to be rational in their decision whereby they aim to maximize the utility derived from the consumption of any product. It is also assumed that consumers have limited incomes and that the value of utility can be quantified in monetary terms. The equi-marginal principle states that a consumer will be in equilibrium if it is not possible to switch expenditure from good X in favour of good Y to achieve an increase in total utility. In other word this principle is satisfied when the marginal utility of every dollar spent on a good is equal to the price paid for that good. If a basket of goods is in question, an individual will continue to alter the mix of consumption of the products until the marginal utility of a dollar spent on each of the goods is equal. Therefore, the equilibrium principle can be expressed as MUx/Px=MUy/Py, where MU is the marginal utility and P is the price of the good. Consumer ...Download file to see next pages Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Modern Microecon, Consumer Theory Essay Example | Topics and Well Written Essays - 2000 words”, n.d.)
Modern Microecon, Consumer Theory Essay Example | Topics and Well Written Essays - 2000 words. Retrieved from https://studentshare.org/macro-microeconomics/1439335-modern-microecon-consumer-theory
(Modern Microecon, Consumer Theory Essay Example | Topics and Well Written Essays - 2000 Words)
Modern Microecon, Consumer Theory Essay Example | Topics and Well Written Essays - 2000 Words. https://studentshare.org/macro-microeconomics/1439335-modern-microecon-consumer-theory.
“Modern Microecon, Consumer Theory Essay Example | Topics and Well Written Essays - 2000 Words”, n.d. https://studentshare.org/macro-microeconomics/1439335-modern-microecon-consumer-theory.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document

CHECK THESE SAMPLES OF Modern Microecon, Consumer Theory

Bandura's Philosophy Theory

His memories are an accumulation of yesterdays. In yesterday's are written his dealings to others and to himself. He finds life more meaningful in the lives of others. His reason for living is to serve others because he learns more of himself by dealing, relating with and loving others. Hence his motto in life is: “Do to others what he wants others to do to him.”

Bandura’s theory confirms the reality of the experience. A man needs mirroring of others to tell him whether what he is doing is fine or not. The wife is the best critic of the husband and vice versa. This is what makes marriage a wonderful ground for discovery for the two is made into one yet uniqueness of each is still there.

Band...
7 Pages (1750 words) Coursework

International Trade Theory

 Further to this, it is also believed that international trade can bring substantial economic welfare to the countries however still most of the countries do not view it as a favorable thing. Despite having a very promising and bright outlook, international trade has been largely viewed with suspension and it is because of this that governments impose barriers to restrict international trade. There can be many reasons behind this act of imposing restrictions or blocking international trade however there are also benefits on the other side too.

International trade has driven the attention of many of the brilliant minds in economics therefore the origins of the economic theory on international trade owe much to the c...
6 Pages (1500 words) Case Study

Dental Veneers as a Breakthrough in Modern Dental Technology

In today’s fashion-conscious world, porcelain and composite veneers remain some of the most popular choices for people seeking to improve the esthetics of their teeth. Porcelain veneers have several advantages when compared to composite veneers including durability, resistance to staining, and amount of tooth structure removed during the procedure.
First and foremost, the porcelain veneers are very durable. They are also very thin – usually between 0.5 - 0.7 millimeters – and brittle, although once bonded to a healthy tooth structure they can become quite strong. The bonding process increases durability and veneers made of porcelain can last for many years, oftentimes between 10-15 years depending on how wel...
8 Pages (2000 words) Term Paper

Traditional Women in the Modern World

It is within the family that many attributes of gender inequality are generated and replicated. Economic and interpersonal dependence on both genders and in various instances more vicious forms of inferiority, are classic elements of marriage and family. Women’s long-established roles leave them with the trouble of widespread domestic and nurturance obligations in addition to limited authority within the family. These trends represent gender inequality within the home and are echoed in the ideology justifying a gender-separated workforce in which women’s earnings and prospects are disproportionate to men’s. While almost every woman has some family bonds to men, by their kinship ties to their fathers and brothers,...
9 Pages (2250 words) Assignment

Consumer Culture and Lifestyles

To the business managers, it makes more business sense to design particular products and services according to particular lifestyles and preferences.
A lifestyle connotes a particular form of individuality, self-consciousness, and self-expression. The bodies, speeches, clothes, eating and drinking preferences, leisure pastimes, cars, homes’, choice of holidays, among others, are all regarded as pointers of individuals’ sense of style and taste (Featherstone, 2003). In other words, these are the individuals’ lifestyles. Companies around the world are utilizing the concept of individuality and lifestyle to build product brands that appeal to particular age groups. This has been necessitated by market segmentat...
11 Pages (2750 words) Assignment

What Are the Most Important Factors in Explaining the Rise of the Modern State

Though the existence of the state can be felt in different walks of everyday life, yet it is an intangible whose nature is impossible to grasp. As a political institution, state embodies the concept of sovereignty. Devetak (2007) describes it as a political unit or a country that possesses sovereignty. State can thus be described as a single, unified whole confined within territorial borders. The state is built in a core geographical area with allowances to a certain extent on the boundaries. According to Strayer (1970), a state exists in the hearts and minds of the people. The collective personality of the state renders it immortal. The state is a multi-faced concept that is fuzzy around its edges. Consequently, we cannot develop...
6 Pages (1500 words) Essay

Free Cash Flows Theory

These are not hard and fast rules in determining the capital structure which should best affect a firms value. These theories lay down the benefits and the costs when a firm chooses what it sees as an adequate mix to maximise the shareholders value.

One of the implications where this research can lead include the possibility of the effectiveness in maximising shareholder value by employing two or more theories in capital structure decisions. Because these theories are more conditional by nature, probing which combinations when used for capital structure decisions are more effective in arriving at the goal of maximising firm value can be another subject for further research.
The role of capital structure in increasi...
11 Pages (2750 words) Case Study

Humanistic Buddhism: A Way of Nirvana for Modern Man

However, how many people in today’s modern world are ready to renounce their life of comfort and materialistic pleasure to know the ultimate truth of life? Hardly anyone will be ready to renounce the pleasures of life. Hence, as Buddhism was believed to be a religion of suffering and severe self-discipline, very few people from the modern world were ready to practice it. However, Humanistic Buddhism, by modifying the teachings and simplifying the practices of the religion, gave a fresh and renewed beginning to Buddhism. Humanistic Buddhism, by modifying its practices to suit the social demands of modern life, has not just saved Buddhism from dying out but has also helped people to find happiness and satisfaction in life by s...
8 Pages (2000 words) Assignment

Discovering the Tragic Hero: Ancient and Modern

...Discovering the Tragic Hero: Ancient and Modern The concept of the tragic hero was first brought forward in ancient Greek mythology through the writings of the philosopher Aristotle as he described the important individual characteristics the tragic hero must possess. Although Aristotle outlines three requisite character traits that the tragic hero should possess, he qualifies the definition of the tragic hero with a set of events that must also take place before the hero can be considered truly tragic. Once this process is understood, it is easy to see how the sudden downfall of a mighty man, such as Oedipus the King from the play by Sophocles for example, would be dramatic and shocking to a public dominated by strict social classes...
9 Pages (2250 words) Essay

Management Theory and Practice in the Early Childhood Education Industry

...Management Theory and Practice in the early childhood education industry This Report applies management theory into practice in the early childhood industry, especially in the context of women leaders. Management issues play a significant role in the academic sector, because early childhood professionals need higher levels of motivation in order to avoid burnout . As pointed out in a study by Osgood and Halsall (2007) where they carried out research to examine the position of women in leadership or management positions, a “glass ceiling” exists for women in the academic setting, which could significantly impair motivation. Since many of the individuals employed in the early education sector are women, addressing this issue is even more...
6 Pages (1500 words) Coursework
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

Let us find you another Essay on topic Modern Microecon, Consumer Theory for FREE!

Contact Us