Cbse class 12 micro economics revision notes chapter 2. Ncert solutions class 12 economics theory of consumer. To understand the various perspectives of consumption, one needs to take an approach that combines the different dimensions of consumption for economic, symbolic purposes which combines with the overall consumer culture as the zeitgeist to. Theory of consumer behavior cardinal approach lecture 8 microeconomics. Consumers preferences and its assumptions microeconomics. This classic text has introduced generations of students to the economic theory of consumer behaviour. Consumer behaviour is an analysis of the behaviour of individuals and households who buy goods and services for personal consumption. Figure 3 maximising consumer satisfaction game theory and competitive strategy mrs.
The theory of consumer behavior built on both the cardinal and ordinal approach is attribute d to modern economists such as alfred marshal, j. The second unit of the course introduces you to the analysis of consumer behavior. Cardinal and ordinal utility 11 cardinal utility means that an individual can measure his utility and can attach specific values of utility from consuming each quantity of a good or basket of goods. Pdf microeconomics ecs2601 03 consumer behaviour ch 3. Ncert solutions class 12 economics theory of consumer behaviour class 12 economics book solutions are available in pdf format for free download. Theory of consumer behaviour free download as powerpoint presentation. In chapter4, we analyze the extent to which the properties of individual demand discussed in chapters2and3also hold for aggregate consumer demand. Law of diminishing marginal utility dmu, assumptions of law of dmu, relationship between totally utility and marginal utility. Behavioural economics, consumer behaviour and consumer policy. Students who are in class 12th or preparing for any exam which is based on class 12 economics can refer ncert microeconomics book for their preparation. Microeconomic theory does not study the economy as a whole and instead studies the individuals and their gain maximizing behaviour in any economy. Approaches and models while behavioural research still contributes to our understanding of human behaviour, it is now widely recognised as being only part of any possible full explanation.
The theory of consumer behavior built on both the cardinal and ordinal. Theories of consumer behavior are a natural extension of human behavior theories. Is her behaviour consistent with the axioms of revealed preference theory. Microeconomic theory offers a general theory about how people make such decisions.
It analyzes how consumers maximize the desirability of their consumption as measured by their preferences subject to limitations on their expenditures, by maximizing utility subject to a consumer budget constraint. Consumer buying decisions are also essential for developing the marketing strategies of firms. Scribd is the worlds largest social reading and publishing site. Jul 14, 2019 consumer theory is the study of how people decide to spend their money based on their individual preferences and budget constraints. The behavior that consumers display in searching for, purchasing, using, evaluating, and. The ordinal utility theory explains consumer behaviour by. Theory of choice a solving the consumer s problem ingredients characteristics of the solution interior vs corner solutions b constrained maximization for consumer c interpretation of the lagrange multiplier road map. This is because the behaviour of consumers towards specific fast. All consumers make decisions to maximize their utility. Utility theory indifference theory vilfredo pareto william stanley jevons described thru analyz in total utility consumers preferencetu and marginal utilitymu of various utils is the unit of combinations of goodsmeasure and services based on consumer satisfaction nature not on totalcan be measured thru tu.
Consumer behavior versus economic theory by richard schmalensee university of california, san diego the neoclassical model of consumer behavior, hereafter generally called utility theory, both serves as the basis for modern welfare theory and draws some of its support from the usefulness of that theory to the economics profession. Microeconomic theory tends to assume that individuals are. The concept of consumer surplus is related to our daily life expenses. Building a better understanding of individuals tastes and. These ncert book chapter wise questions and answers are very helpful for cbse board exam.
Buying behaviour, this papers aim is to provide an indepth elucidation of the many aspects that influence consumer behaviour. Comparison of theories relating to consumer behaviour. Marketing implications of consumer behaviour study of consumer behaviour modelling an overview consumer behaviour is comparatively a new field of study which evolved just after the second world war. Later on, alfred marshall developed it in his book, principle of economics published in 1890. This standard theory of consumer s choice starts with the assumption that the consumer can rank any two consumption bundles x 1, x 2 and y 1, y 2 in order of their desirability. Concepts and articles for online microeconomics course. She is a key member of a team exploring how technology can be used to enhance the student learning experience. Theory of consumer behavior cardinal approach lecture 8. Sir richards own great monograph, the measurement of consumers expenditure and behaviour in the united kingdom 51 retains its classic status in applied econometrics to this day. Consumer theory jonathan levin and paul milgrom october 2004 1 the consumer problem consumer theory is concerned with how a rational consumer would make consumption decisions. Individual consumer preferences, constraints, choices and revealed preferences, indifference curves, budget lines and marginal utility can best be understood when mapped to the circular flow of goods and services, as shown in this presentation for. In this chapter, we begin the formal study of microeconomics by examining the eco nomic behavior of. Understanding consumer behavior will assist business entities to be more practical at selling, designing, development of products or services, and every other different initiative that impacts their customers. Introduction to economics and microeconomic theory.
In this lecture, we will learn about utility, how to define it and how we represent it mathematically. Pdf understanding the consumer behavior of smokers. There are two main approaches to the of consumer behavior of demand. Consumer theory a consumer decides how to spend his income or wealth to buy goods with the objective of maximizing his welfare. We first consider the microeconomics of consumer theory and will later turn to a consideration of firms. The decisions that individuals make about what and how much to consume are among the most important factors that shape the evolution of the overall. This theory describes how the typical consumer, constrained by a limited income, chooses among the many goods and services offered for sale. Towards a better understanding of consumer behavior. Theory of consumer behaviour the concept of consumer surplus was introduced by a. February 20 1this lecture notes are only for the purpose of my teaching and convenience of my students in class, but not for any other purpose. Choose your answers to the questions and click next to see the next set of questions. Four theories stand out as influential for marketers. Theory of consumer behaviour is a chapter that deals with various concepts utility, marginal utility, total utility, budget, monotonic preferences, indifference curve, marginal rate of substitution, diminishing rate of substitution, indifference map, properties of indifference curve, conditions for consumer s optimum, demand, demand function, demand schedule, demand curve, linear demand. Consumer choice law of diminishing marginal utility consumer surplus the price in the market would favor consumers who placed a higher value on a product than the market price paid by all consumers the basic tenets of the theory of consumer choice the consumer is rational the consumer wants to get the most satisfaction utility for the money spent on goods.
Ncert book for class 12 microeconomics chapter 2 theory of consumer behaviour is available for reading or download on this page. The field of consumer behaviour is the broad study of individuals, groups or organisations and the process they use to select secure and dispose of products, services, experiences or ideas to satisfy needs and the impacts that these processes have on the consumer and society. The second stage of the consumers behavior in the decision taking process, proposed by the model of engel and blackwell consists in the analysis of the information. The first approach is the marginal utility or cardinalist approach. Notes for cbse class 11th chapter 2 consumer s equilibrium. The two theoretical tools of consumer theory are utility functions and budget constraints. In economic analysis, the aggregate behavior of consumers is often more important than the behavior of any single consumer. Previous next the second unit of the course introduces you to the analysis of consumer behavior. Each individual in each of these groups makes its decisions in order to achieve some goal a consumer seeks to maximize some measure of satisfaction from his consumption decisions while a firm seeks to maximize its profits.
Consumers equilibrium notes microeconomics cbse class. Consumer behavior is best understood in three distinct steps. The decisions that individuals make about what and how much to consume are among the most important factors that shape the evolution of the overall economy, and we can analyze these decisions in terms of their underlying preferences. Consumer behavior i about the tutorial consumer behavior is about the approach of how people buy and the use merchandise and services. Consumer behaviour jane priest is a teaching fellow at edinburgh business school and teaches parts of the oncampus marketing course, as well as the consumer behaviour elective by distance learning. Once the human behavioural models have been addressed, the chapter will focus on models of consumer behaviour. The weak axiom of revealed preference warp consumers. An overview of the theory of microeconomics consumer behaviour. This led to paradigm shift of the manufacturers attention from product to. The microeconomic theory or price theory thus is the study of individual parts of the economy. Pdf in sum, the cardinal utility numbers generated by neoclassical utility functions provide more information than do their ordinal. Psychological factors influencing consumer behaviour instructor janne peltoniemi pages 46 supervisor birgitta niemi learning, and attitude and behaviour change. This article critiques the economic, symbolic and consumer culture perspectives of consumption and their impact on the strategies pursued by the marketers. By a consumer we mean a person who has the opportunity to buy.
Later the theory was modified with the addition of value and. Theory of consumer behaviour utility marginal utility. To register online tuitions on to clear your doubts. Introduction to theory of consumer behaviour ca cpt cs. In this chapter, we will study the behaviour of an individual consumer. Microeconomics is the study of specific individual units. While no single theory is unifying, each one provides a unique piece of the puzzle in understanding the psychological processes of people and their patterns of consumption. Pdf microeconomics ecs2601 03 consumer behaviour ch. The sellers market has disappeared and buyers market has come up. All exercise questions with solutions to help you to revise complete syllabus and score more marks in. Ordinal utility ranks utility received from consuming different amounts of goods or baskets of goods. The theory was based on the expectation of decision outcomes which was a cognitive process. Lecture 3 axioms of consumer preference and the theory. The theory of consumer choice is the branch of microeconomics that relates preferences to consumption expenditures and to consumer demand curves.
This is defined as cpp,wxeflp,wlxeflp,wimpliesxx ornotxx. Cbse notes class 12 business studies theory of consumer. Introduction to microeconomics, theory of demand and supply, consumer behavior, production function, analysis of costs, perfect competition, imperfect competition, rent and wages, interest and profit, forecasting and decisionmaking, introduction to macroeconomics, national income, consumption and investment function, classical and keynesian economics, fiscal policy and budget deficit. Consumer behaviour theory tries to explain the relationship between. Written by 2015 nobel laureate angus deaton and john muellbauer, the book begins with a selfcontained presentation of the basic theory and its use in applied econometrics.
Principles and theories of micro economics concepts and. The research programme established there and in the 1954 economic. The decision making theory was examined and modified by nicholas bernoulli and oskar morgenstern but it originate about 300 years ago. In each of these contexts, individuals, who are referred to as end users or ultimate consumers, buy the products for fine use.
Consumer behaviour emerged in the 1940s and 50s as a distinct sub. Introduction to indifference curves and budget lines. Economics and consumer behavior angus deaton, john. The personal consumer buys goods and services for his or her own use, for the use of the household or as a gift for a friend. Firm buy sell quantity theory of consumer behaviour quantity description of how consumers. For consumers, their decisions are driven, quite simply, by what they want. Consumer behavior theory of consumer behavior description of how consumers allocate incomes among different goods and services to maximize their wellbeing. This paper will adopt a sociological approach to consumer behavior, and will develop a typology of consumers behaviors incorporating the concepts of norms, values, and social.
For any three consumption bundles a, b and c it is valid that if consumer prefers a to b, and he prefers b to c, then he must prefer a to c. Microeconomics of consumer theory the two broad categories of decisionmakers in an economy are consumers and firms. This chapter will focus on the area of consumer behaviour by first considering a. Ncert book class 12 microeconomics chapter 2 theory of. Economics revision notes for class 12 chapter 2 theory of. Consumer theory mark dean lecture notes for fall 2009 introductory microeconomics brown university 1introduction in this section of the course we will examine the standard methods that economists use to model the behavior of consumers.
Consumer behavior theory tends to be structured mainly from a psychological perspective, and all the major models of consumer behavior incorporate this perspective. The second category of consumer the organizational consumer includes profit and notforprofit. Microeconomics studies and analyzes individual human being, household, firm, industry etc behaviour with respect to issues like production, consumption, distribution, price determination etc. For example, one basket may contain one hamburger, one soft drink, and a ticket to a ball game, while another basket may contain two soft drinks and two movie tickets.
Learn vocabulary, terms, and more with flashcards, games, and other study tools. Pdf behavioural economics, consumer behaviour and consumer. Smoking in microeconomics included in the theory of consumer behavior. Free pdf download of ncert solutions for class 12 micro economics chapter 2 theory of consumer behaviour solved by expert teachers on as per ncert cbse book guidelines. This theory discusses how the consumers allocate income between different heads and how they decide how much to. She is also observed to purchase x 1 18, x 2 4 at prices p 1 3, p 2 5. Ncert solutions for class 12 micro economics chapter 2. Consumer behaviour is the study of individuals, groups, or organizations and all the activities associated with the purchase, use and disposal of goods and services, including the consumer s emotional, mental and behavioural responses that precede or follow these activities. It blends elements from psychology, sociology, social anthropology and economics. A consumer purchases x 1 20, x 2 10, at prices p 1 2, p 2 6.