CONSUMER BEHAVIOR
 A study of how individuals make decision to spend
their available resources (time, money and effort)
or consumption related aspects (What they buy?
When they buy?, How they buy? etc.).
 Broadly the study of individuals, or organizations
and the processes consumers use to search, select,
use and dispose of products, services, experience,
or ideas to satisfy needs and its impact on the
consumer and society.
FACTORS AFFECTING CONSUMER BEHAVIOR
 CULTURE – influence varies from country to country
 SOCIAL FACTORS – norms of behavior in social
groups
 PERSONAL FACTORS – lifestyle, occupation, age
 PSYCHOLOGICAL FACTORS – individual behavior
 Customers - specific in terms of brand, company, or
shop. It refers to person who customarily or
regularly purchases particular brand, purchases
particular company‘s product, or purchases from
particular shop.
 Consumer - person who generally engages in the
activities - search, select, use and dispose of
products, services, experience, or ideas.
 The study of consumer behaviour helps everybody
as all are consumers. It is essential for marketers to
understand consumers to survive and succeed in
this competitive marketing environment. The
following reasons highlight the importance of
studying consumer behaviour as a discipline.
 The reason to study consumer behaviour is because
of the role it plays in the lives of humans. Most of
the free time is spent in the market place, shopping
or engaging in other activities.
 Utility – degree of satisfaction per unit of
consumption
CARDINAL UTILITY THEORY
- Utility is measurable. Utils is the unit of
measurement for satisfaction.
LAW OF DIMINISHING MARGINAL UTILITY
- Marginal (extra or additional); one consumes
more and more of a particular good, marginal
utility decreases. It is more of a psychological
law and forms the basis of a download sloping
demand curve.
THE ORDINAL UTILITY THEORY
- Also called indifference theory; utility is not
measureable but can only be ranked or
compared.
- Indifference curve – different combinations of
two goods that can be consumed that yield the
same level of satisfaction or utility. A series of
indifference curve is called and indifference
map.
THEORY OF PRODUCTION AND COST
 Production Function – technical relationship
between the firms and its output.
Output = f(Inputs)
 Fixed Inputs – quantity is not changed by the
firm regardless of its reasons.
 Variable inputs – quantities can readily be
changed like labor and raw materials
 Production period:
o Very short-run period – immediate
period
o Short-run period – some inputs used by
firms are fixed while others a variable.
o Long-run period – all the inputs used in
production of the firm are variable units
THE LAW OF DIMINISHING MARGINAL
RETURNS
- Successive unit of variable inputs are added to
fixed inputs.
Average product (AP): AP = TP / Labor
Marginal product (MP): MP = TP / L