Theory of consumer behaviour消费者行为理论.docVIP

Economics of consumer behaviour The willingness of consumers to purchase a product or service is essential for any firm to earn a profit. Firms need to be able to estimate and forecast the demand for their products. Therefore the theory of consumer behaviour is an essential part of managerial economics. Basic assumptions of consumer theory In the theory of consumer behaviour, it is assumed that all individuals make consumption decisions in order to maximise their satisfaction from consuming various goods and services. However, each consumer has a limited personal income. For simplicity, it is assumed that all consumers spend all of their personal income. It is also assumed that each consumer has perfect knowledge: they know about all products that are available, they know the prices of the products, and they know their own personal income. It is assumed that consumers can rank combinations of goods and services consumed, or consumption bundles, according to the level of satisfaction they obtain from each bundle (see Figure 1.1). Preferences are complete if the consumer always can make one of the following responses when asked about their preferences between any two consumption bundles: 1. I prefer bundle A to bundle B (AB) 2. I prefer bundle B to bundle A (BA) 3. I am indifferent between bundles A and B (A~B). It is also assumed that preferences are transitive: if AB and BC, then AC. Finally, it is assumed that more is always preferred to less: having more of a good always increases satisfaction and never decreases satisfaction. Utility is the term used by economists for the satisfaction that is obtained from consumption. Although utility is not directly measurable, economists assume that preferences can be represented using a utility function. The numerical values assigned to utility by the utility function are arbitrary, because utility is not observable or measurable. For a consumer who consumes only two goods, we can write: U=f(X,Y) where X and Y are the qu