Theory of Consumer Behavior
As an economist, you must study the theory of consumer behavior. Everyone acts as a consumer on daily basis. So what defines their behavior and what kind of choices they make? We will read about all these with some basic terms.
Who is a consumer?
The theory of consumer behavior says that a consumer is one who buys goods and services for the satisfaction of their wants. We all are consumers, we start our day with the consumption of lemon water, we brush our teeth with toothpaste, we use soap for washing our hands, and so on.
What do we mean by Utility?
Utility means use-value or the want satisfying power of a commodity is known as a utility. Whatever we consume on a daily basis possess a use-value for us, that is, if we are thirsty and we drink a glass of water, then water has a use-value of satisfying our thirst.
What is a consumption bundle?
A consumption bundle includes all those commodities or goods and services that a consumer is consuming.
What is a consumer budget?
A budget shows all the combinations of goods and services that a consumer may purchase, given the current prices with his/her income level. So, consumer budget shows the income level of the consumer with the help of it, a consumer can afford the goods.