GROUP IV

CONSUMER
 Who is consumer? A consumer is one who
demands good and services.

 The consumer is the king in a capitalist or free

market economy.

 Producers: They are the one who needs to satisfy

the needs and wants of consumers in order to
earn profits.
CONSUMER SOVEREIGNTY
Our power to determine what is
produced since we are the ultimate
purchasers of goods and services.
GOOD AND SERVICES
GOOD (Tangible economic products)
- car, books, clothes etc.

SERVICES (Intangible economic activities)

- hairdressing, catering, insurance, banking,
telecommunication, etc.
TANGIBLE GOODS
CAN BE CLASSIFIED ACCORDING TO, BUT NOT LIMITED TO, THE FOLLOWING:

Consumer goods.

Essential or necessity goods vs. Luxury goods.

Economic and free good

Taste and preferences.

MASLOW’S HIERACRCHY Of
NEEDS
 Physiological needs – Basic needs for sustaining
human life itself, such as food, water, warmth, shelter.

 Safety Needs – These are the needs to be free of

physical danger and the fear of losing ones work,
property, food, or shelter.

 Social Needs – These needs cover the value of

belongingness, love, care, acceptance and
understanding of family, relatives and friends.
 Esteem needs – These needs explain the importance of self-
esteem, recognition, status of an individual and the general
acceptance of the society to an individual.
 Self-actualization needs – Explain the worth of a person’s
self- development, growth and specialization.
THE ECONOMIC OF
SATISFACTION
 Utility in economics, refers to the
satisfaction or pleasure that an
individual or consumer gets from
the consumption of a good service
that (s)he purchase.
MARGINAL UTILITY
 Is defined as the additional satisfaction that an
individual derives from consuming an extra unit a
good or service.

Marginal means “additional or Extra, in economics”.

TOTAL UTILITY

 Is the total satisfaction that a consumer derives

from the consumption of a given quantity of a good
or service in a particular time period.
Table 4.1
Hypothetical Demand Schedule
for Siopao
QUANTITY DEMAND
PRICE
(Qo)
15 1
12.75 2
10.5 3
8.25 4
Table 4.2
Hypotheical Demand Schedule
for Siopao
UNIT MARGINAL
PURCHASED TOTAL UTILITY UTILITY
1 40 40
2 90 50
3 170 80
4 270 90
5 350 80
Mathematical Derivation of
Marginal Utility
How do we derived marginal utility? Marginal utility
is simply the change in total utility divided by the
change in quantity. Thus,

Expanding our equation, we can solve for marginal

utility using the following equation.

∆𝑇𝑈
𝑀𝑈 =
∆𝑄
--
Where:
TU2 = THE NEW TOTAL UTILITY
TU1 = THE ORIGINAL UTILITY
Q2 = THE NEW QUANTITY CONSUMED
Q1 = THE ORIGINAL QUANTITY CONSUMED
Applying formula in table 4.2
170 −90
MU =
3 −2

MU= 80
Graphical illustration of Total
Utility and Marginal Utility
 Figure 4.1: Total Utility Curve
TU TU

11

10

5 Q
1 2 3 4 5
 Figure 4.2: Marginal Utility Curve
MU

MU
Q
Consumer Surplus
Is a measure of the welfare we
gain from the consumption of
goods and services, or a measure
of the benefits that we derive
from the exchange of goods.
Table 4.3
 Consumer Surplus
P
Willing to pay for
the pants

3,000 ------------------------ Consume Surplus 500

2,500 --------------------------------

Actual Price