example of consumer behavior essay

Consumer Behavior - List of Essay Samples And Topic Ideas

An essay on consumer behavior can analyze the factors influencing consumers’ choices and purchasing decisions. It can discuss consumer psychology, marketing strategies, the impact of advertising, and the role of social, cultural, and economic factors in shaping consumer behavior, highlighting the complexities of understanding and predicting consumer choices. A substantial compilation of free essay instances related to Consumer Behavior you can find at PapersOwl Website. You can use our samples for inspiration to write your own essay, research paper, or just to explore a new topic for yourself.

My Consumer Behavior is Connected

I recently purchased a shirt from Express. Express is an American fashion brand mainly to young men and women. What motivated me to buy the shirt is I need to buy a shirt for the company’s annual gala celebration party at the end of the year. I think my consumer behavior is linked to my self-concept. According to the research, consumers tend to choose and use the brand personality consistent with their actual self-concept, although this matching may be based […]

Consumer Behavior Towards Purchase, Consumption and Disposal

Case studies serve as a useful method in obtaining an overview of a certain case by looking closely at the situation. More and more businesses are utilizing this approach to analyze consumers’ behavior because they serve as a crucial factor that influence the rise and fall of many market industries. When done properly, case study research provides the missing puzzle that enables businesses to analyze errors, find a solution, and yield marketable profits. One example of a case study that […]

The Evolution and Diversity of Pepsi Products

When one thinks of Pepsi, the first image that might spring to mind is a cool, refreshing cola drink. However, delving deeper into the vast world of PepsiCo reveals a diverse range of beverages and snacks that have touched the palates of consumers across the globe. With its origins in the late 19th century as a digestive aid concoction, Pepsi has grown to become an iconic brand that offers a multitude of products catering to varied tastes and preferences. The […]

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Social Psychology of Food Consumption, Health Sciences and Consumer Behavior

The usage behavior of information systems found in the research in the past twenty years has primarily been focused on the beginning of adoption and usage of these systems. In the research the intention-based models were largely used to see how users adopt a particular Information System. Although, the Information System adoption theory in the beginning is accepted in most recent researches but the post adoption usage and continuous behavior has substantive differences from adoption and continuous behavior. Understanding the […]

The Implications of Classical Conditioning for Consumer Behavior

When I think about learning, I picture students in a classroom or lecture hall, with books open on their desks and them listening intently to a teacher or professor in the front of the room. But in psychology, learning means something else. To psychologists, learning is a long-term change in behavior that is based on experience. Two of the main types of learning are called classical conditioning and operant conditioning. Classical conditioning is defined as, a learning process that occurs […]

Whether Consumers are Loyal to the Product Depending on the Area of Behavior

Brand Origin Knowledge or BoK is a term used to see if the customers can identify the product’s origin. It’s an important term in Consumer Behavior and is used to learn if the consumers are loyal towards a product based on its origin. If we specifically look at the “2016 Ranking of Top 100 Brand”, we can see that 5 out of the first 10 big brands comes under technology department. This shows how the category of technology is evolving […]

Data that Corporations Collect about Consumer Behavior

Resource consumption is a critical factor recognized by social scientists as contributing to environmental damage. It is also considered a major threat to the sustainability of the world's environmental systems (Brown). It's taken a century of research and data to convince the vast majority - even in the scientific community - that human activity can alter our entire planet's climate (History). Now it is more evident and efforts are being made to address climate change and to transition to a […]

Consumer Behavior and Responses to Situations

There are many reasons why contributing to academic research is important, including this survey we just completed. Considering the Psychology department here at Pace University is analyzing students and their life experiences / well being, who better to participate in the survey than actual students themselves. The difference in your average student vs. someone in the workfield or of younger generations is massive. Consumer behavior and responses to situations are indeed quite contrasting. Another contributing factor, is time. SIMMONS is […]

Mass Market and Consumer Culture Products

Industrialization was the cause for Modernity in today's Design because Industrisation gave way to Mass production in which goods could be produced more efficiently for Mass Market and goods could be afforded by the middle class in something known as Consumer Culture. These goods became objects of conspicuous consumption wherein one could display their class, social status or role in any given community. This rise in buying a practice and new opportunities led Designers to believe they had a greater […]

Type of Consumer Behavior

The topic of this paper will be minimalism, specifically minimalism as a movement in which people find meaning in life by consuming less and more responsibly. Minimalism challenges excessive consumption and unethical practices within capitalism. On an individual level, minimalism encourages consumers to think rationally and critically about their own purchases. Additionally, minimalism is often seen as a way to achieve happiness by decluttering and returning to important personal values. Many other terms have been proposed to define this type […]

Consumer Behavior Internet Exercise

Introduction  The purpose of this paper is to compare two general interest or entertainment websites, and two company websites that show advertisements. For each category, I will define each of the selected websites to describe what they entail and how each of these incorporate their ads. I will then select one of their ads and will discuss how that particular ad triggers problem recognition for their intended audience. General Interest / Entertainment Web Site The two general-interest and entertainment websites […]

Publix Customer Service Case Study

Publix Super Markets, Inc. started way back in 1930 and has since become one of the biggest and most loved grocery stores in the U.S. People really like shopping there because of the fantastic customer service. Publix is often at the top in customer satisfaction surveys. This essay looks into why Publix has such a great reputation, focusing on their company philosophy, how they train their employees, how they engage with customers, and some special things they do that make […]

A Look at Target’s History: from Humble Beginnings to Retail Giant

Target, a name everyone knows in the retail world, has a rich history that stretches back over fifty years. Known for its iconic red bullseye logo and a commitment to offering high-value, trendy merchandise, Target has grown from a single store in Minnesota to a major player across the U.S. Target's story begins in 1902 when George Dayton founded the Dayton Dry Goods Company in Minneapolis, which later became the Dayton Company. The first Target store opened on May 1, […]

The Strategic Alliance between Target and Sephora: a Retail Revolution

In the constantly evolving realm of retail, strategic alliances have emerged as indispensable for firms seeking to broaden their market outreach and enrich customer experiences. One such notable collaboration is the amalgamation between Target, a prominent general merchandise retailer, and Sephora, a distinguished beauty retailer. This partnership, initiated in 2021, has engendered a distinctive shopping encounter that capitalizes on the strengths of both entities, proffering a wide assortment of beauty merchandise within the convenience of Target establishments. This discourse delves […]

Consumer Value Stores: Evolution and Impact on Retail Industry

Consumer value stores, commonly referred to as CVS, have evolved dramatically from their modest beginnings as small, local stores offering basic household necessities at affordable prices. They’ve grown into a cornerstone of the retail landscape, serving millions of people daily. The idea behind these stores is simple but powerful: offer good value, make shopping convenient, and keep things accessible. As the retail environment and consumer expectations have changed over the years, CVS stores have adapted and expanded their services to […]

Understanding Consumer Behavior: the PepsiCo and Frito-Lay Connection

In the panorama of the global snack food sector, Frito-Lay stands as a titan, with its offerings – ranging from the iconic Lay's potato chips to the cheesy delight of Cheetos – ubiquitous in grocery store aisles and snack cupboards worldwide. But who holds sway over this snack giant? The answer lies with the conglomerate synonymous not only with snack foods but also with a wide array of consumer goods: PepsiCo. The trajectory of Frito-Lay's journey to becoming a subsidiary […]

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Essay on Consumer Behaviour: Top 8 Essays | Microeconomics

Here is a compilation of essays on ‘Consumer Behaviour’ for class 9, 10, 11 and 12. Find paragraphs, long and short essays on ‘Consumer Behaviour’ especially written for school and college students.

Essay on Consumer Behaviour

Essay Contents:

• Essay on the Modern Approach of Consumer Behaviour

Essay # 1. Introduction to Consumer Behaviour:

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Microeconomic theory tends to assume that individuals are the economic agents exercising the act of consumption, the decision to purchase goods and services. The consumer is assumed to choose among the available alternatives in such a manner that the satisfaction derived from consuming commodities (in the broadest sense) is as large as possible.

This implies that he is aware of the alternatives facing him and is capable of evaluating them. All the information pertaining to the satisfaction that the consumer derives from various quantities of commodities is contained in his ‘utility function’.

We assume that each consumer or family unit has complete information on all matters pertaining to its consumption decision. A consumer knows precisely what his money income will be during the planning period. ‘Utility’ refers to subjective satisfaction derived from consumption of commodities.

The 19th century economists, namely W. Stanley Jevons, Leon Walras and Alfred Marshall came up with the cardinal theory of consumer behaviour. They considered utility is measurable just as the weight of objects. The consumer is assumed to possess a cardinal measure of utility when he is able to assign every commodity, a number representing the amount or degree of utility associated with it.

Under this theory, it is possible to measure marginal utility (MU) of a commodity, whereby by MU we mean a change in utility due to a change in per unit of consumption of a commodity. Another property is the existence of Law of Diminishing Marginal Utility (LDMU).

This means as a consumer keeps on consuming successive units of the same commodity, consumption of other commodities held fixed, marginal utility diminishes. Total utility increases at a decreasing rate for successive units of consumption of a particular commodity.

Essay # 2. Assumptions of Consumer Behaviour under Cardinal Theory :

(i) Utility is numerically measurable.

(ii) Marginal utility is the unit of measurement of utility.

(iii) Marginal utility of money (or total budget) is constant.

(iv) The Law of DMU holds,

(v) Independence axiom holds.

Total utility can be expressed as sum of utilities pertaining to each commodity separately. For example, let utility be a function of two goods x 1 and x 2 , i.e.,

In Fig. 1 we divided consumption space into four zones — I, II, III, IV. Due to the axiom of non-satiation it is observed that consumption bundle, XPY (X has more of x 2 than Y for the same x 1 ). Similarly, ZPY Hence all the points in zone I are superior to Y and all the points in zone III are inferior to Y.

The remaining two zones, viz., II and IV are important to draw indifference map as follows:

A ray through origin, OH, passes through Zone II. All Space points on OP are inferior to Y but XPO i.e., somewhere between P and X where there is switch of preferences say point M. Successive drawings of such a ray through origin can make us safely assert that there is a point say M which is indifferent to X. Similar exercise can be carried out with Zone IV and joining these points like W, M, Y, T, we get a curve called Indifference Curve.

An indifference curve is a locus of points in a commodity space—or commodity bundles—among which the consumer is indifferent. Each point on an indifference curve yields the same utility as any other point on that indifference curve. The IC approach has been applied in areas of international trade and public finance, community (social) indifference curves (ICs and SICs) are used to show gains from trade.

Similarly, ICs are used to compare to the welfare effects of a lumpsum tax and a price distorting tax. IC approach including the Slutsky theorem is also used to show the effect of income tax on a worker’s labour-leisure choice. At times SICs are used to compare cost of living indices and then show the effects of price inflation.

We may now summarise the basic properties of indifference curves as follows:

1. IC is Downward Sloping:

In Fig. 2, along the IC, utility is constant. Therefore, when consumption of one commodity increases, given the level of other commodity, utility increases. But since total utility is constant, additional utility has to be sacrificed by reducing the consumption of other commodity. Hence IC is downward sloping.

2. ICs are Non-Intersecting:

In Fig. 3, CPB (since C has more of x 1 than B for same x 2 ). But CIA as both C and A lie in same IC, IC 0 . Again, BIA, as both B and A lie on same IC 1 .

. . . Therefore, by the axiom of transitivity, CIB (or BIC) which is not possible or gives con­tradictory results. Therefore ICs cannot intersect.

3. Higher ICs give Higher Utility:

It can be seen that BPA, as more of x 2 is consumed in B than A for the same amount of x 1 . Hence all the points on IC 1 are preferred to all the points on IC 0 , as it gives higher utility. Again, CPB as for same x 2 , more of x 1 is consumed. Therefore, all points on IC 2 are preferred to all points on IC 0 and IC 1 as it gives more utility. Higher IC gives higher utility (Fig. 4).

4. ICs are Convex to the Origin:

Axiom 4 leads to convexity of IC which implies diminishing MRS where by MRS we mean absolute necessary reduction in consumption of x 1 due to additional consumption of x 2 by one unit such that total utility is fixed (assuming two commodities x 1 and x 2 only)

Now we shall discuss about budget constraint and budget lines. The budget line is set off more commodity bundles than can be purchased, if the entire money income is spent.

Hence, budget constraint is given by following equation:

where m = total money income (assumed constant).

P i = price of i th commodity

X i = i th commodity, i = 1, 2,…, n

In a two-commodity framework, therefore, the budget constraint will be

m=p 1 x 1 + p 2 x 2

or, x 2 = (m/p 2 – p 1 /p 2 ) x 1 [This is indeed the equation of a downward sloping straight line.]

The solution of problem of maximisation of utility subject to the budget constraint is the main motive behind the theory of consumer behaviour.

Properties of Demand Functions :

Demand functions are homogeneous of degree zero in prices and income which means that equi-proportional and unidirectional changes in prices and money income do not alter optimality condition. This homogeneity postulate suggests that the consumer is free from money illusion.

Consumers’ initial equilibrium is point E. Every time his income increases the budget line shifts F and G are the corresponding equilibrium points. The locus of all the equilibrium points is called income consumption curve. In the Fig. 6 both x 1 and x 2 are normal goods.

If x 1 is inferior the ICC will be backward bending and if x 2 is inferior it will be forward falling. See (Fig 7). If consumption of a good falls as income rises, then such a commodity is called inferior goods. So one important prediction is that if the consumer spends all his income on two goods, both cannot be inferior at the same time.

The relation between money income and quantity consumed is explained by a function is known as the Engel’s curve. Now we allow the price of one of the two goods to fall. Suppose that of x 1 falls. In this case the budget line be­comes flatter and the consumer is able to reach higher in­difference curves and enjoy more utility or satisfaction, thus improving his level of welfare.

So every time P 1 falls, the consumer moves to higher IC and reaches a new equilibrium point. The locus of succes­sive equilibrium points is the price consumption curve (PCC) which shows the consumer’s reaction to a single price change which changes the price ratio, i.e., p 1 /p 2 .

There are two uses of PCC. First, we can derive the con­sumer’s demand curve for a commodity from the PCC. According to the ordinal approach, the demand curve for a normal good is downward sloping due to price effect which has been decomposed by Hicks and Slutsky into two parts, namely, substitution effect and income ef­fect. The slope of the demand curve depends on the relative strength of the two effects which, in turn, depends on the nature of the commodity under consideration.

From the PCC we can predict price elasticity of demand (e) by using the total outlay method.

Three points will be noted in the context:

(i) If PCC is downward sloping, demand for x 1 is price elastic.

(ii) If PCC is horizontal, demand for x 1 is unitary price elastic.

(iii) If PCC is upward sloping, demand for x 1 is price inelastic.

Essay # 5. Price Effect as a Sum-Total of Substitution Effect and Income Effect:

From the Marshallian demand curve (constant money income demand curve) it is not possible to explain the price effect because Marshallian approach is based on LDMU, i.e., cardinal theory. It was John Hicks and E. Slutsky who decomposed the price effect into two parts. Thus, two new concepts of demand curve have emerged, namely,

(i) Real income constant demand curve (the Slutsky demand curve)

(ii) Total utility constant demand curve (the Hicks demand curve)

We shall now construct Marshallian demand curve and compensated demand curve for a normal good in a two-commodity framework.

From the price effect such derivation of the demand curve for x 1 is as follows:

Let initial budget line be AS in Fig. 10(a) for price p 1 , corresponding equilibrium x 1 at E 0 is x 1 . Hence for price p 1 , x 1 is plotted in Fig. 10(b). If p 1 falls slope of budget line falls and hence AB becomes flatter. The budget line becomes AB’. The consumer reaches higher utility level on IC 2 and new equilibrium x 1 is x 1 M . Plotting this in Fig. 10(b) and joining E 0 and E M in Fig. 10(b), we get the negatively sloped demand curve for x 1 which is the Marshallian demand curve, D M .

We will construct D H and D S for same ini­tial conditions as the one we considered while drawing the Marshallian demand curve. Let price of x 1 , p 1 fall from p 1 o to p 1 ’. For Hicksian demand curve we consider budget line, CD tan­gent to initial IC 0 implying constant utility level even as new price ratio P’ 1 /P 2 and hence parallel to AB’. Because of movement from E 0 to E H , x 1 rises from x 1 to x 1 H . This is purely substitution effect, and joining E 0 and E M we get Hicksian demand curve D H .

If we follow the Slutsky approach, we can make the following two Predictions:

(i) Perfect Substitutes:

If two commodities are perfect substitutes like blue and black ink for a colour blind person the IC will be a straight line with PE = SE and IE = 0.

(ii) Perfect Compliments:

If two commodities are perfect complements like left and right shoe SE = 0 Thus, PE = IE. For Slutsky demand curve we consider budget line C’ D’ , which passes through initial equilibrium point E 0 implying that consumer is just enough to purchase initial equilibrium commodities even at new price ratio P’ 1 /P 2 , hence parallel to AB.

This hypo­thetical budget line is thus to the right of CD and hence consumer reaches higher IC, IC 1 . Consumption of x 1 rises, hence when plotted in 10(b), we see that D S is flatter than D M . The movement from E S to E M is the income effect.

The substitution effect is always negative because the entire IC approach is based on the of substitution which suggests that the consumption of one commodity is always at the expense of the other but IE is negative in case of normal good, if we consider change in real income. Thus in case of a normal good the negative income effect reinforces the negative, SE so as to make the price effect very strong in this case and the demand curve is relatively flat.

In case of an inferior good, IE is positive but less-strong than the substitution effect. So the price effect is still negative but less strong than that in the case of a normal good. In case of a Giffen good, which is essentially a price phenomenon, the positive income effect is stronger than the negative substitution effect so as to cause price effect to be positive. This is one of the exceptions to the empirical law of demand. These points are summarized in Table 1.

An important aspect of ordinal theory is the derivation of Slutsky Equation. This is done in the mathematical appendix.

Essay # 6. The Hicksian Interpretation of Consumer Behaviour:

Hicks define own-price substitution effect in terms of constant utility.

According to SARP, if (x 1 , x 2 ) is revealed preferred to (y 1 , y 2 ) (either directly or indirectly) and (y 1 , y 2 ) is different from (x 1 , x 2 ) then (y 1 , y 2 ) cannot be directly or indirectly revealed preferred to (x 1 x 2 ). Likewise, in the ordinal theory under revealed preference approach it can be proved that substitution effect is always negative. Let prices be given by P° when a consumer purchases a commodity bundle X° when X’ was affordable. This means X° is purchased at P° when X’ was affordable. This is possible only when,

Essay # 8. Modern Approach to Consumer Behaviour:

An alternative approach to the theory of consumer demand was pioneered by K. Lancaster. He argued that goods are demanded as their characteristics. It is these characteristics that yield utility. Thus, we may consider three different goods say sugar, honey and saccharixe. But they may have only two characteristic, viz., sweetness and calories. If a new sweetener is produced we analyse it not as a new good but as one better that has the same characteristics.

Thus, compared with traditional analysis, the new approach has two advantages:

(i) We can study the introduction of new goods,

(ii) We can study the effects of changes in quality.

Comparison with traditional approach:

In the traditional theory, the consumer’s indiffer­ence curves are given in terms of the original set of goods. Now if a new good is introduced in the market we have to introduce a whole new set of indifference curves or surfaces. All the information in the preference about old set of goods is discarded.

In terms of the new approach we can make an insightful analysis of consumer choice. In the real commercial world many of the so-called new goods are actually the same as the old goods with the characterisation of different proportions.

Thus, if we consider the preferences in terms of characterisation we can analyse introduction of new goods very easily. We do not have to discard any old set of prefer­ences as worse. If new goods appear in the market with new characteristics, we have to intro­duce a new set of preferences.

A major advantage of the characteristic approach is that it per­mits the analysis of many goods. At times the number of goods is considerably higher than the number of characteristics. Furthermore, once we think in terms of characteristics we have to consider substitution effect which is different from the substitution effect of the traditional theory.

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Consumer behaviour

1. introduction.

Human beings engage in several activities that their psychological processes influence and are influenced by. They involve themselves in consumption, work, sleep, play, etc. These activities can be valuable for future research in consumer behaviour. Consumer behaviour concerns the buying of goods and services for personal consumption. There are many elements that influence consumer behaviour, such as cultural factors, social factors, personal factors, and psychological factors. Most of these factors are uncontrollable; however, marketers can determine to some extent how a consumer will behave and the decisions they will make with strategic marketing activities. Consumer behaviour is about understanding how people buy and use products and services. Understanding consumer behaviour can help marketing managers and other parties of interest be more effective at marketing and selling. By understanding what influences consumers, marketers can implement an effective marketing mix. Marketers will have a greater understanding of how to attract consumers to a product by studying consumer behaviour. As one party of interest, firms employ marketing concepts and tools to accurately understand customer needs, identify the best customers, and provide huge customer value and satisfaction. There are several reasons to understand consumer behaviour. The two main objectives of marketing are to attract new customers by promising superior value and to keep and grow current customers by delivering satisfaction. High customer retention rates lead to strong profitable customer relationships.

1.1 Overview of Consumer Behaviour

Consumers are one of the most essential parts of businesses. Without consumers, there would be no sale of goods and services, which would result in the liquidation of the business. A consumer can be anyone who buys a product for the purpose of it being consumed or if they buy a product so they can use it in the future. An example of this could be a housewife who goes to the supermarket to buy 7 cans of tomatoes so she can use them in her cooking. These cans can be considered a product that is being consumed. An example of a product that is being bought for future use is a college student taking their car to the local mechanic to get the brake pads changed so they can continue using the car to get to and from work. The brake pads are the product in this case. A consumer can play numerous roles when making a purchase, and this is something that marketers need to understand. The decision-making process and the behavior of consumers are something that needs to be studied in depth. The offerings in consumer markets are vast and vary from products that are necessities for everyday life to luxury or specialty items that consumers can live without. Different offerings will typically result in different consumer behavior. For example, a consumer buying a necessity product like milk will spend little time in the purchase decision-making process and will also spend little time seeking out information on the product. On the other hand, a consumer who is in the process of purchasing a luxury car is likely to spend a great deal of time in the decision-making process and also a lot of time seeking out information for the product. Understanding the differences in consumer spending and the behavior and decisions that help to lead up to the purchase of these different offerings is imperative for a marketer. This understanding can help a marketer to influence the consumer purchase of their product by learning consumer behavior, which affects the buying process of a product in various ways. In some cases, understanding consumer behavior is so important that companies will take drastic measures to change the way that consumers view their product. An example of this can be seen in the recent changes made to the Vegemite product.

1.2 Factors Influencing Consumer Behaviour

Cultural factors exert the broadest and deepest influence on consumer behavior. Although cultural shifts are complex phenomena that defy straightforward explanations, it is possible to identify some cultural trends that have clear implications for consumer behavior. A society's culture consists of core values, beliefs, and secondary values. Italy and the United States are two societies with different core values: in Italy, people are more likely to emphasize tradition and fulfillment in their lives; in the United States, the emphasis is on progress and a better future. These core values lead to different secondary values. For example, Italians value good food to a much greater extent than do most Americans. Consumer behavior in both countries reflects these differing cultural priorities. Each culture contains smaller subcultures, a group of people with shared value systems based on common life experiences and situations. We can recognize many subcultures in the United States, among them nationalities, religious and racial groups, and geographic regions. Because people in subcultures share significant life experiences, they also exhibit distinct product and service needs. Marketing success can be built upon identification of the size and power of subcultures, and an understanding of the differences across them. Marketers often define the consumer's situation in terms of factors such as the reason for the purchase, or the need that the purchase is intended to satisfy. A person's position in each of these situational factors can be more or less permanent, or it can be a transient condition. The economic situation can be a less permanent factor, or it can be unrelated to a more permanent condition such as a student devoting time to future career prospects. A thorough understanding of a target consumer's situation can allow a marketer to design a marketing mix specifically catered to the consumer's needs. Social class is a relatively permanent and ordered division in a society whose members share similar values, interests and behaviors. It does not represent income, and in some cases is not correlated to income, but it does strongly influence many aspects of a consumer's behavior. Members of the same social class exhibit similar behavior in purchasing, using and evaluating goods and services. Social classes show distinct product and brand preferences in areas such as clothing, home furnishings, and automobiles, and often take offense when marketers try to reach them with products perceived as outside their proper social role. Social classes have lower, middle and upper subdivisions, and within these there are status group and the working class. A person's social class can also influence his choice of a certain product or brand as a form of expressing self-image. Since the 1970's, social scientists have been suggesting that changing occupations and the break-up of traditional reference groups are creating a lessening in the impact of social class on consumer behavior. This topic is still hotly debated today, but regardless of the outcome, knowledge of a consumer's social class can still be an indicative factor in developing a marketing strategy for a specific product.

1.3 Importance of Studying Consumer Behaviour

The term consumer behaviour refers to the behaviour that consumers display in searching for, purchasing, using, evaluating, and disposing of products and services that they expect will satisfy their needs. The importance of studying consumer behaviour as an academic discipline has at least five reasons. Firstly, in a rapidly changing environment, while making marketing strategies, strong decision must begin with the clear identity of the target grouping of potential buyers for the product/services. The more precise the description of the target market, the easier it is to decide on the most effective marketing mix. Understanding consumer behaviour will enable the marketer to know how his competitors will react to his various marketing strategies as consumers are the ones who will choose to switch to other companies' services or to stay with the product that they got. The decision to stay or to switch can be determined by the level of involvement of the consumer with the current product or services. This information will help the marketer to design marketing strategies that are in the interest of their target consumers as well as their competitors by identifying market segments and deciding on the one that is most in line with their resources. High involvement decisions are more likely to benefit from the use of a brand or company comparison ads. This type of ad strategy is unlikely to be effective for low involvement products, where consumers are more likely to purchase from habit, convenience, or price. Brand switching occurs across all products and can often lead to a temporary increase in sales volume due to promotions and ads, and in most cases, it is wiser to try and win consumers back from competitors rather than trying to steal customers from them. Price can be used as a competitive weapon to damage an enemy's market or to prevent an attack by lowering or raising it. Understanding how competitors will react can be quite complex as it's hard to determine their intended move, the best scenario planning is an approach to simulate probable competitive scenarios and the likely responses of the major competitors. Simulation in today's fast-changing environment will probably require the use of computer models. Understanding consumer behaviour will enable marketers to forecast the purchase patterns of these consumer groups and design marketing strategies to cater to them. This means that there are abundant job opportunities for consumer behaviour analysts to join the various sectors of fast-moving consumer goods, industrial marketing, services marketing, and international marketing. Secondly, with the transition from the product orientation to the customer orientation era, today's enterprises are emphasizing more and more on customer satisfaction. They are shifting from mass marketing to target marketing. The sale is only the beginning in the marketing of services, and the attempt to get the consumer to try the product is often unsuccessful and may result in lost time and money. It is the beginning of an ongoing marketing effort. Cost-plus government contracts are also no longer an automatic sale or a return purchase and may require public marketing attempts. Understanding consumer behaviour will enable those in the government and non-profit organizations to be more effective in their marketing and advertising spending. This is a very big field that offers many rewards, and if it is shown that the use of such practices benefits these organizations or the general public, it will develop more demand for the marketing of ideas, politicians, and candidates. These days everyone is saying that we are in the age of information, and the information industry will need marketers to market an ever-expanding range of products and ideas. Today's youth are the future generation and may seek to enter many of these fields, so it is a good idea for young people to do some career research in consumer behaviour!

2. Consumer Decision-Making Process

The consumer decision making process is one of the most systematic ways of looking at how consumers make decisions to buy or not buy a product. This model has been given various names by different marketing academics but the most popular is the traditional "funnel" model, with the consumer passing through successive stages beginning with awareness, through to trial and then adoption. There are many other ways that the decision making process has been modelled. Engel, Blackwell and Miniard (1990) identify five main stages in the decision making process. 1) Need Recognition 2) Information Search 3) Evaluation of Alternatives 4) Purchase Decision 5) Post-Purchase Evaluation However, when the consumer is making a complex buying decision, these stages may occur over a period of time. Take for example, buying a new car. The consumer may recognize the need to buy a new car at any one time but go through the process of information search and evaluating alternatives for several months. The model is also relevant to social and marketing or promotion issues that there is no purchase behavior involved e.g. voting in a political election. There is still a process of determining how behavior change might occur in the consumer to try the new behavior (e.g. going from not voting to voting). "Consumers always move through the whole sequence of action or learning, rather more or less of it sometimes at different stages before they adopt a new product" (1969) This is a very useful model to point out that the new product is not always adopted straight away in the purchase decision stage. A classic example here is the adoption of DVD players with people evaluating the difference between DVD and Video for many months before they actually went to making a purchase of a DVD player and thus adopting the new technology.

2.1 Need Recognition

A consumer's decision to buy a product or service is a complex process. A process that involves five stages, each of which is critical to its outcome. The consumer decision-making process is described as a series of stages that begins with the identification of a need and ends with post-purchase evaluation. These five stages provide a framework for understanding a consumer's decision to make a product or brand choice that can then be used to develop marketing communications. A consumer may have a particular need to satisfy. For example, a consumer is hungry, which reinforces the message that advertising affects the nature of the choice process by influencing the types of brands evaluated. At this stage, the consumer is in a state of 'want'. The want may vary depending on the different types of wants that might need to be satisfied, but it is generally agreed that this process is the starting point for a consumer's decision choice. A consumer's need may be prompted by internal or external stimuli. For example, a consumer sees a television commercial that advertises a new mobile phone with the features the consumer currently has, but the new phone has extra features of which the consumer feels he needs to have a desire for the new phone. This stimuli developed a space discrepancy where the actual state (does not have the new phone) as opposed to the desired state (that has the new phone). This reveals the need for the new mobile phone, a need which was activated by the information search stage. This stage may be bypassed depending on how strong the want is. For example, a hungry person walks past a bakery and smells the aroma of freshly baked bread, this may immediately cause the person to walk inside and purchase a loaf.

2.2 Information Search

Once a consumer perceives a problem, he or she needs to perform an information search to solve the problem. Often consumers are unaware of the problem they are trying to solve and may only have a discrepancy in their current state of affairs and some desired state. An illustrative example would be that of a consumer who knows his or her car is in need of repair but does not know the cause of the problem. It could also be the case that the consumer simply has recognized symptoms of an issue that they are treating as normal. A further complication in this stage is that sometimes the information a consumer may be looking for is in the form of a solution. With the proliferation of advertising often the best information may be an advertisement from a company, but this will only reinforce a brand preference rather than search for alternatives, this can be a pitfall that many consumers will encounter. These inferences and implications cause the process of information search to be uncertain and the usefulness of the information is not always fully graspable. There are two types of information that can be of use. Internal information search is when a consumer uses past information and knowledge to solve a problem. The advantages are that the information is believed to be more credible and the consumer is not biased by any outside opinions. An elderly man may remember in his time cars were much easier to fix and parts were more readily available, this has now created a preference for the type of car he is looking for now in an effort to make repairs easier. External information search is when a consumer looks to outside information from other people or the market for further knowledge. This can be simple as asking a friend for their opinion or going on the internet to find information and reviews on different digital cameras. This method of information search can be significantly more expensive in terms of time and money. An interesting perspective is that what a consumer may find as a successful change of one product into another is actually a failure in the sense of the second product does not perform the same function as the first product, thus showing that the decision itself is not always clear.

2.3 Evaluation of Alternatives

When the information search is complete, the consumer gets a set of brands that he/she believes can solve the problem. Which one to buy? This is the question for the consumer. He/she tries to determine the best brand available and also tries to get the best product at the best price. The consumer uses both the product characteristics and his personal characteristics to make a decision on the best brand to buy or whether to postpone the decision. These characteristics form the consumer's brand image. Brand image is the perception of the brand by the consumer. It is an important factor in the purchase decision. Evaluation of alternatives is of two types: Evaluative criteria are the various features of a product that a consumer sees. Each product has got some job in hand and the features that consumers see will help to get the job done. What are the various evaluative criteria? Pepsodent toothpaste has a job of cleaning teeth, but the consumer might look for healthy white teeth and given the various types of toothpaste available, will choose the one that cleans and gets the whitest teeth. Filter coffee has a job to refresh the mind at any time of day. These consumers will choose the brand that has the best taste and refreshing qualities. But the most refreshing quality of coffee is its smell. The consumers who feel the real coffee lovers' job is to lift the mind will choose Bru coffee, which is best bought in small granules. Finally, the type of buyer does a consumer of coffee need to have a good refreshing drink at any time of day will buy coffee that needs the least preparation job. Depending on each of these consumers, the brand image of said coffee will differ. A consumer buying instant coffee needs a quick and refreshing bag of coffee. The Bru coffee granules put the buyer in mind that he can get a refreshing cup at any time. Of the various evaluative criteria, what the consumer looks for in a product depends on his past experience of similar products and what he has heard from other sources. This information that he has heard is the second type of evaluation of alternatives called "availability of high-quality information to the consumer". An increase in the amount and quality of information decreases the difference gap between the brands. But the best way to make a decision is difficult to determine because it depends on the importance of the product to the consumer and there are various decision rule strategies and attributes to each of them.

2.4 Purchase Decision

The fourth stage of the consumer decision process is the purchasing stage. This is where the individual actually buys the product. A number of purchasing tactics can then be used to achieve this, and as such, the marketer should consider which is the most effective method in persuading the consumer to purchase their product. The purchase decision can be affected by a number of risk factors. There are five types of risk: performance, financial, social, physiological, and safety. Failure to identify these risk factors can result in missed opportunities for the marketer. Marketers should seek to understand the different types of consumers associated with their product. There are four types of consumers: complex, variety-seeking, dissonance reducing, and habitual. The buyer types differ according to involvement and the way they make their decisions. The marketer should understand how these characteristics can affect the purchasing probability of their product. There are three general categories of consumer buying behavior. These are: product involvement, relevance of differences between brands, and attitude towards the purchase. These factors can have a significant influence on the purchasing process and the purchase decision. Marketers will have to understand the product and consumer to determine which of the four purchase decision behaviors the consumer makes. These are: complex, dissonance reducing, habitual, and variety seeking. Marketers will find themselves needing to encourage the consumer who has intention to the product. This can depend on characteristics such as brand and attitude, which may cause the consumer to change his mind on which brand to buy. Consumers who are satisfied with the previous product can also be difficult to sell to, and the marketer should identify the differences and work on promoting the superiority of his product.

2.5 Post-Purchase Evaluation

After making a purchase, the consumer will experience some level of dissonance. Sometimes the feeling is quite intense, and other times it is hardly noticed. Most people try to justify their purchase by making a list of all the positive factors about the item they just purchased and a list of all the negative factors about the items they did not purchase (acronym: PAPN). The consumer will also be motivated to search for information that either supports the positive aspects of the purchase or alleviates the negative aspects of the purchase. If the consumer finds information that supports the purchase decision, this will lead to higher product satisfaction. If the advertisement for a product is really good, the company may want to send a post-purchase message with even stronger arguments than the original message. This can be a good way to help ensure repeat purchases. Sometimes the firm can help the consumer to feel better about the purchase, especially with a complex product that can bring a lot of dissonance. The firms can send thank-you notes, congratulating the consumer for the wise purchase. Or, the firm can invite the consumer to special events or give them special offers that can make the consumer feel better about the purchase. Offering guarantees can also be a good way to help the consumer feel good about their purchase. If a consumer is fully satisfied with their purchase, this can lead to customer loyalty and repeat purchases for the same product.

3. Psychological Factors in Consumer Behaviour

What drives a person to choose a particular product or brand? Is it just a want or a need, and does the difference between these two have an effect on consumer behavior? These are questions that are often asked by marketers. Needs are the basic human requirements; people need food, air, water, clothing, and shelter to survive. These needs become wants when they are directed to specific objects that might satisfy the need. An individual's priorities of these needs are influenced by their personality and lifestyle. For example, a person who has a very active social life and cares much about what other people think of them might place a strong emphasis on their personal appearance, which reflects the social need. This may lead them to spend a large amount of money and time on clothes and cosmetics. Once a person has recognized and accepted that they have an unfulfilled need, they then try to find a want-satisfying product. When a need is fairly simple and the information needed to find a good solution is clear, then the consumer search process is often routine and satisficing is usually sufficient - a satisfied need is called a want. On the other hand, complex needs usually involve one of two problems. The first is that the consumer might not know what the possible solutions are. In this case, they are likely to seek appropriate information or look for advice. High-involvement consumers are those who are prepared to spend much time and effort in the decision-making process. This will be followed by the second type of problem where the consumer is unsure whether the various different solutions will be effective. The consumer here may weigh up the consequences of making the wrong decision and thus experience anxiety. This process is known as "latent problem solving" and is often apparent in the choosing of a brand of a familiar product category.

3.1 Motivation

Motivation determines behaviour, thus marketers need to consider the motives behind consumers' behaviour for particular products and services. A motive is a need that is sufficiently pressing to drive a person to act, and it's the strength of our motivation that decides our action. Maslow's theory on the hierarchy of needs suggests that our motives are based on 5 needs: the need for self-actualisation, esteem needs, social needs, security needs, and psychological needs. He also suggested that unsatisfied needs are a cause of tension and it is that tension that we act upon. Marketers must research the stages of the consumer purchase decision and the various roles behind the purchase. It's important to learn the motives of the initiator, influencer, decider, and buyer in the purchase as they may differ. For instance, a child will want a PS3 for the games, but their parent will be motivated by the need for a DVD player. There may be a family motive to buy something educational like a language CD to benefit the whole family. Marketers must research the motives of their target markets. For instance, when looking at car buyers, although a car can be a family-oriented purchase, younger buyers may be motivated by prestige or performance, and single people may be motivated by a desire to stand out and be different. A motive to purchase is a clear distinction between a desired state and an actual state. The motivated person will work through the purchase process quickly and will be satisfied if the product fulfills and supersedes the promise. An in-depth understanding of motivation is complex and difficult in the world that we live in. It's fast-moving, where many of our purchases are habitual and based on low-involvement decision making. But the motive behind consumer behaviour is clear, and it's the driving force behind sales and the uptake of products or services.

3.2 Perception

Perception is defined as the process by which an individual selects, organizes, and interprets stimuli into a meaningful and coherent picture of the world. It is the mechanism through which an individual interprets the external environment by making sense out of the multitude of stimuli that are capable of impinging on the various sense organs at any one time. Perception is a complex process through which people assign meaning to the world around them. Throughout the process of perception, people may make errors in their judgment due to a number of factors. In this essay, we will focus on how perception affects consumer behavior. Stimulation is the first process in which an individual receives data to be aware of. In marketing, this is the meaning of the advertisement that consumers may be exposed to. This data can come from the various senses: sight, smell, touch, etc. Each sense is capable of receiving a vast amount of stimulation for the consumer; however, they will not be aware of most of it. The process of selection of data is not reliant on the advertisement itself but the consumer's characteristics in which they are programmed to be more receptive to certain stimuli. This can be a problem for marketers. For example, the effectiveness of advertisements before 6 pm on television, which may be a time when adults/teenagers are less attentive to what is being shown and children are the ones watching. A better example may be selling a product to someone who is a music lover to auditory stimulation, as it is not effective marketing a visual giveaway at a store. Assuming that data has been selected, it is then organized into a certain pattern. This is usually done by simplifying the data and/or relating it to something that is already known by the individual. This can come in the form of a brand having an image that is perceived to be like another, e.g. Pepsi and Coca-Cola similar to yin-yang, or reality. Sometimes marketers are not aware of the image that a product may have, e.g. the Edsel car by Ford is said to have failed due to being well marketed but a poor product. The final process is the interpreting of the data into something that can easily be understood. This is dependent on the interpretation of the data being in agreement with the behavior towards the product. An example of this is the Vauxhall car brand. It was known as an old man's car. This would not be what a marketing executive at Vauxhall would interpret from the perception. The outcome is that it ceased to be bought by a newer generation, and Vauxhall received the data and changed the image of the brand, doubling the UK sales to younger drivers. The process of changing various stimuli into a brand image or what a product is perceived to be by the consumer is a very arduous one and sometimes weary on the luck of the marketer.

3.3 Learning and Memory

The section 3.3 was also divided into two subsections, learning and memory, as these are two closely related and critical ingredients involved in behavioural decision making. The capacity of a consumer to learn a product choice is a key factor in determining the strength of their future purchase behaviour. Learning is a change in the content or organization of long-term memory and in consumer behaviour, learning occurs when consumers make connections between a stimulus and a response and are then reinforced for their behaviour. Essentially, the consumer learns about proper product choices through experiencing the positive outcomes of good choices or negative outcomes of bad choices. Marketers must be aware of the impact their firm's marketing mix and extraneous influences can have on learning. Changes in the content and organization of long-term memory can occur due to repetitive advertising. This is referred to as maintenance rehearsal. It is simply repeating the material to oneself. It is an essential task to make sure the SIM card for new information has enough space. This is important in understanding the cognitive stage of consumer involvement in purchases. The consumer may develop attitudes towards a brand which are stored in memory and then purchase the brand simply because he recognizes the brand name in store. Maintenance rehearsal theory is saying that unless a brand constantly reminds the consumer of these attitudes, it is unlikely that the purchase will be frequent and easily forgotten. A stronger form of behavioral learning is concept and image learning, which involves the learning of new behaviors and understanding the relationship between different elements in the process. An example is customers learning different shopping patterns through internet shopping or the use of a new brand of detergent and then realizing the price was not worth it as the quality did not differ from the cheaper brand. Marketers need to understand these changes in learning and attempt to create the strongest link between the brand and positive reinforcement. This may require a change in the customer's habitual buying behavior, which can be difficult to alter.

3.4 Attitudes and Beliefs

Attitude is an evaluation of a product that is formed by beliefs and feelings. It consists of cognitive, affective, and conative components. Attitude is developed through the learning process. Attitudes are acquired through training and experiences, past behavior, and normative influences. Attitudes and beliefs provide a framework to the individual on how to act in a certain situation. The consumer can be influenced by their relative attitude, such as their attitude towards exercise and fitness. The theory of reasoned action and the theory of planned behavior stress that consumers will tackle behavior and formulate the best plan to execute it, with the most positive or favorable outcomes. For example, a consumer may plan to join a health club because they feel it is good for health and beneficial. This outcome is the result of their attitude toward health clubs. These theories have their weaknesses. They do not consider the consumer's habit, which is a limitation to consumers. This is because they may perceive that they intend to limit sugar intake, but their previous actions and norms (e.g., eating a can of baked beans and beans on toast for the past 5 nights for dinner) will override the intention to eat healthier food. This theory also places heavy emphasis on rational decision making and high involvement decisions. High involvement decisions use more cognitive processes before a decision, whereas low involvement products and habitual purchases are purchased quickly and with less thought. This may result in impulse buying. Props for the worst answer given. Gaaah. An attitude is more easily remembered for a high involvement product, as suggested by the foot-in-door theory and cognitive dissonance.

3.5 Personality and Lifestyle

Consumer personality can be defined as the dynamic organization of an individual's characteristics (physiological and psychological) which determine consistent patterns of behavior. Simply put, what do people do and why do they do it? Understanding the personalities of consumers is hugely important when trying to ascertain their needs and wants and matching your product or service to these, meanwhile attempting to influence them to act in a particular way. Consumer personality and consumer brand is a concept that has gained attention in the last decade and a half, which has resulted in several empirical studies. Rather than examining personality in the abstract, researchers have focused on measurement of specific personality traits and brand or product traits. Brand and product traits can be described as personality-like characteristics which can be attributed to a brand or a product, i.e. ruggedness, sophistication. By measuring consumer brand personality and consumer actual personality, researchers claim to be able to predict purchase and usage behavior due to such things as congruency theory. The neo-Freudian personality theory, which is touted by using trait and type theory, states that a person consists of characteristics that can be internally and influence his buying behavior. Buyers can be classified in terms of personality factors. It is generally said that the person who has an authoritarian type of character can be distinguished from those who are less authoritarian. Those with a high level of authoritarianism usually have high concern in status and it is being reflected in their buying decision and what they bought. This type of consumer will be more concerned in a brand compared to those with lesser authoritarianism. Next, the tactic personality theory proposes just how, when, or other to solve the actual problem or question being faced when doing the process of purchasing. People have different ways of "consuming" a good or service, and this theory is closely related to those who are consumers.

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Consumer Behavior Essay

Executive summary, consumer preference, budget constraint, consumer choice, works cited, key question.

The aim of this paper is to explain consumer behavior, in terms of how consumers allocate their limited incomes to buy various goods and services. The paper will focus on the factors that influence consumer behavior.

People have numerous wants, but their resources are limited. Consequently, they can not satisfy all their wants. Consumers have to decide on how to allocate the limited resources in order to satisfy the numerous wants. However, the right decision has to be made in order to avoid wastage of resources and to achieve the highest level of satisfaction.

Thus, it is important to investigate the factors that influence allocation of resources or consumer behavior. Additionally, understanding consumer behavior helps manufacturers to produce goods that meet the consumers’ expectations.

Consumer behavior will be analyzed by reviewing secondary literature. In particular, existing literature will be used to explain how consumer preference and budget constraint affect consumer choice. The secondary sources of information will include textbooks, journals and research reports on consumer behavior.

Discussion of Sources

A lot of written literature already exists on the factors that influence consumer behavior. The effect of consumer preference and budget constraint on consumer choice is extensively discussed in microeconomics textbooks and journals. Additionally, the relationship between the two concepts is well documented. However, literature on the exact definition of consumer behavior still lacks.

Key Conclusion

The research reveals that consumer behavior is, mainly, influenced by consumer preference and budget constraint. For a consumer to make the right choice, he must take into account his or her preferences and budget constraint.

Consumer Behavior

Consumer behavior is “the study of when, why, how and where people do or do not buy a product” (Arnold 34). Consumer behavior explains the purchase decision making process. Individuals have wants that are not only unlimited, but also differ in intensity. However, individuals have scarce resources or limited disposable income to spend on their wants.

Additionally, the available resources have competing alternative uses. Due to the scarcity of resources, individuals can not satisfy all their wants. Thus, the consumer has to make a choice on which wants to be satisfied first and those that can be satisfied later. The decision on what to buy is determined by the consumer’s preference.

Consumer preference describes the bundle of goods and services that a consumer prefers to purchase in the market (Krugman and Wells 56). Product preference arises because human beings, naturally, have different tastes and preferences (Champniss). Consumers’ preferences are linked to the experience of using the product in terms of the product’s functionality and benefits.

This means that the preferred product must satisfy the consumer’s demands such as personality and emotions (House, Gao and Spreen 450-464). Thus, consumer preference is determined by the level of satisfaction or utility derived from consuming the good or service. Utility refers to the ability of a product to satisfy the wants of the consumer.

In economics, the consumer is assumed to be a rational being. Thus, the consumer will aim at maximizing utility or satisfaction by spending his or her limited disposal income. The marginal utility derived from the use of a particular product diminishes as more of that product is consumed. Marginal utility refers to the additional utility obtained by consuming an extra unity of a product. However, the marginal utility of money is constant.

Apart from utility, consumer preference is also influenced by the consumer’s budget (Arnold 47). For example, when a person is purchasing an automobile, he or she must first decide on the preferred brand or model. This decision is often based on the performance or attributes of the available automobile models. However, the various types or models of automobile have different prices.

Besides, the consumer has limited cash to spend on the automobile. Thus, the consumer has to match his preference with his or her budget (Perner). In this context, the consumer may decide to purchase an automobile model that is associated with less satisfaction if the ideal model costs more than the consumer can afford. This is based on the fact that the consumer can not spend more than he or she has in terms of disposable income. Hence, consumers satisfy their wants or maximize utility subject to a budget constraint.

A budget constraint refers to the bundle of goods and services that can be purchased at the prevailing prices with the available disposable income (Krugman and Wells 56). The consumer normally chooses a combination of goods and services that he can purchase with the available income in order to achieve the highest level of satisfaction or utility.

Budget constraint depends on the consumer’s income. A consumer with low disposable income will have a highly constrained budget. This means that the consumer’s budget will allow him to purchase only a few goods and services. A consumer with a high disposable income, on the other hand, will have a less constrained budget. This implies that the consumer’s budget will enable him to purchase a relatively large number of goods.

Budgets are influenced by the prices of goods and services (Kim 203-205). According to the law of demand, the consumer will buy more of a product as the price of that product reduces and vice versa. Thus, in order to remain at the same level of satisfaction, a consumer facing a given budget constraint will consume less of a product whose price has increased (Kim 203-205).

Additionally, the consumer will increase the consumption of the product whose price has reduced. The consumer’s budget also determines the type of goods and services he can purchase. For example, the type of residence demanded by a university student depends on his disposable income.

A student with a lot of financial resources can choose to stay in a rented apartment. Assuming that a rented apartment is more comfortable than any other residential alternative, the student will be able to derive the highest level of utility since his budget is not financially constrained. A student with little financial resources can choose to stay in students’ hostels at the university. In this case, the student’s decision is informed by the fact that the financial constrain on his budget can not allow him to rent a better residence.

Finally, a student with no income to spend on accommodation can decide to stay at home and commute to the university on a daily basis. Thus, budget constraint influences the consumer’s product preference or the type of a product that the consumer can purchase. The influence of budget constraint is reflected in consumers’ choice.

Consumer choice refers to the ultimate decision on what to buy. It takes into account the consumer’s preferences and budget constraint (Krugman and Wells 65). As stated earlier, the consumer has unlimited wants and limited resources. Consequently, the consumer has to make a trade-off in his purchase decisions.

In order to make the right trade-off, the consumer must combine his budget constraint and his preference (Parkinson and Goodall 236-244). In this context, the budget constraint represents what the consumer can afford while the preferences represent what the consumer would like to purchase or consume (Parkinson and Goodall 236-244). The trade-off involves consuming more units of one good and less units of another good in order to maintain the same level of satisfaction or utility.

The optimal choice of goods and services is one that enables the consumer to derive the highest level of utility. At the optimum position (choice), the marginal rate of substitution (MRS) is equivalent to the relative prices of the goods and services in the market. MRS refers to the rate at which an individual is willing to trade-off a given set of goods and services.

Consumer choice is determined by the consumer’s level of income. The financial constrain on the budget will reduce if the consumer’s income rises and vice versa (Arnold 67). Thus, consumers with a high income can choose from a wider variety of goods and services than consumers with low income. Additionally, the consumer with a higher income can purchase more goods and services than the consumer with low income (Arnold 58).

Consumer choice is also determined by the product prices since price changes affect the budget constraint (HKTDC). Price changes affect consumer’s choices in two ways namely, the substitution effect and income effect.

Substitution effect occurs when the consumer buys more of cheap goods and less of expensive goods. In a nutshell, the expensive goods are substituted with the cheap goods (Krugman and Wells 78). Income effect occurs when the price change affects the total amount of goods that can be purchased with the available disposable income.

For example, a rise in tuition fee by 2% will affect a student’s budget and expenditure choices. The rise in tuition fee means that the student will have less money to spend on other items such as clothes. Thus, in order to purchase clothes and pay the new tuition fee, the student has to reorganize his budget. The reorganization will involve making a trade-off between the tuition fee and the clothes. The student may reduce his expenditure on clothes in order to allocate more money for the new tuition fee.

The purpose of this paper was to analyze consumer behavior by investigating why people consider particular purchases and the factors that influence consumer’s purchase decisions. As discussed earlier, consumer behavior refers to the process of making purchase decisions (Krugman and Wells 45).

The purchase decisions are influenced by consumer preference and budget constraint. Consumer preference refers to the goods or services that a consumer would like to purchase. Budget constraint, on the other hand, refers to the amount of goods and services that the consumer can afford. Thus, the consumer’s choice must take into account the preference and budget constraint (House, Gao and Spreen 450-464). This involves making a trade-off between the goods to be bought with the limited income.

Arnold, Roger. Microeconomics. New York: McGraw-Hill, 2008. Print.

Champniss, Guy. How can we Change Consumer Behavior to Benefit the Environment? Guardian Sustainable Business, 3 Nov. 2011. Web.

HKTDC. Changes in Consumer Behavior in Traditional Markets and Implications for Hong Kong Exporters . HKTDC, 12 Sept. 2009. Web.

House, Lisa, Zhifery Gao and Thomas Spreen. “Consumer Preference for Mandrins: Implications for Sensory Analysis.” Agribusiness 27.4 (2011): 450-464. Print.

Kim, Youn. “Alternative Specifications of Consumer Intertemporal Budget Constraint and Measures of Wealth and Savings.” Applied Economics 7.3 (2000): 203-205. Print.

Krugman, Paul and Robin Wells. Microeconomics. New York: McGraw-Hill, 2010. Print.

Parkinson, Bonny and Stephen Goodall. “Considering Consumer Choices in the Economic Evaluations of Mandatory Health Programs.” Health Policy 101.3 (2011): 236-244. Print.

Perner, Lars. Consumer Behavior: The Psychology of Marketing . Encyclopedia of Psychology, 1 Jan. 2012. Web.

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• Chicago (A-D)
• Chicago (N-B)

IvyPanda. (2018, November 6). Consumer Behavior. https://ivypanda.com/essays/consumer-behavior-3/

"Consumer Behavior." IvyPanda , 6 Nov. 2018, ivypanda.com/essays/consumer-behavior-3/.

IvyPanda . (2018) 'Consumer Behavior'. 6 November.

IvyPanda . 2018. "Consumer Behavior." November 6, 2018. https://ivypanda.com/essays/consumer-behavior-3/.

1. IvyPanda . "Consumer Behavior." November 6, 2018. https://ivypanda.com/essays/consumer-behavior-3/.

Bibliography

IvyPanda . "Consumer Behavior." November 6, 2018. https://ivypanda.com/essays/consumer-behavior-3/.

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