Consumer behavior is of great importance for the development of goods production and supply.
Consumer behavior is the process of generating consumer demand for a variety of goods and services.
People's actions in the sphere of purchasing consumer goods are subjective and sometimes unpredictable. However, there are a number of typical common features that can be noted in the behavior of the average consumer:
Consumer demand depends on his income level;
Each consumer strives to get “everything he can” for his money, that is, to maximize total utility;
The average consumer has a distinct system of preferences, his own taste and attitude towards fashion;
Consumer demand is influenced by the presence or absence of interchangeable or complementary goods in the markets.
Consumers also have non-functional demand. Let's consider its types.
“Snob effect”: snobs buy precisely those goods that rise in price in order to emphasize their social status.
"Veblen effect": a phenomenon in consumer theory in which consumers can have a demand curve with a positive slope, since they are characterized by conspicuous consumption.
“Presumed quality effect”: goods of the same quality in different stores are sold at different prices. At the same time, more expensive goods are in many cases purchased more often, since they are assumed to be of higher quality.
“The effect of joining the majority”, or the “carriage effect”: the desire of people to keep up with fashion, to be “no worse than others.” This effect causes an increase in demand for those goods that people around the consumer buy.
“Irrational demand”: purchases that are not planned by the consumer, but occur under the influence of momentary whims and desires.
“Speculative demand”: occurs in conditions of shortage of a particular product.
In the life of modern society, there is an increase in the influence of the consumer on the producer. As a result, in the well-known formula “ what, how and for whom to produce?” attention is focused not on what to produce, but on what to consume.
There are a number of arguments in favor of this formulation of the question. It is known that for the manufacturer the goal is to make a profit. Under these conditions, it is advisable to produce only such goods that can be sold on the market at a price exceeding the costs of its production. This is where the “appeal” of the manufacturer to the consumer occurs. If the consumer paid more money for the product than the costs, the manufacturer will make a profit. Of course, the individual consumer cannot pass judgment on the manufacturer. The success or failure of a manufacturer depends on the total behavior of all consumers. This phenomenon is called consumer sovereignty (French souverain - bearer of supreme power). The consumer's sovereignty lies in his ability to influence the producer. In a society where there is no shortage of goods, consumer sovereignty becomes particularly relevant, and the tone for the further development of production is set not by producers, but by consumers. Therefore, in modern economic theory, the fundamental category is the behavior of the consumer, not the producer.
A necessary condition for consumer sovereignty is freedom of consumer choice. However, it may be limited by a number of measures:
The introduction of a card system, i.e., rationing the consumption of goods during periods of war, famine and other troubles;
Legislative prohibition of the production and consumption of harmful goods (drugs, alcohol, tobacco);
Stimulating the consumption of useful goods and services (books, theater, music).
Such restrictions on the freedom of consumer choice exist in any society. Such restrictions are justified only as a temporary measure in emergency situations or as a necessary measure to protect against obvious evil. In the same case, if the restriction of freedom is an integral part of the implementation of egalitarian theories in practice, the result of such a restriction may be a severance of the connection between the consumer and the producer. Restricting freedom of choice is a dangerous weapon that should be used very carefully and in emergency situations.
Is competition good or bad? What makes people use loans and overpay interest to the bank? How can we ensure that our expenses do not exceed our income? All these questions are answered by the section of economics that studies the rational behavior of producers and consumers in the modern world.
Economic science of people
From the point of view of this science, all types of human behavior are divided into four types - production, distribution, consumption and exchange. The economic system itself is based on production, the purpose of which is to produce profit through the exchange of goods for money. The other side of this coin is consumption. It is determined by a certain law called “rational consumer behavior,” which means thoughtful and dictated by reasonable reasons.
Actions of the consumer and producer as two interdependent aspects in the economy
Production and consumption are interconnected processes that regulate each other. The rational behavior of a consumer, employee, owner, family man, citizen comes from making decisions that are consistent with the income of each economic entity. The consumer not only chooses certain market offers, but also influences producers with his choice (or lack thereof). In some areas of the economy, competition is so strong that marketers have introduced the concept of “consumer dictate.” After all, in a competitive race, only those entrepreneurs survive who were able to well understand the typical features of rational behavior of the consumer - their client.
Consumer as a driving factor
So, a consumer is someone who is a subject of consumption: buys, uses a product or service. In fact, this is any representative of humanity, but also legal entities, associations, etc. The purpose of consumption is to extract maximum profit from the use of a product. The limiters in this case are prices, budget, assortment, etc. Due to their actions, both the consumer and the manufacturer are forced to develop certain strategies of behavior or rational choice.
The usefulness of rational consumer behavior for the economy also depends on the type of economic activity of the country. If this is a command-administrative type, then the regulation of consumer choice is very high - for example, he cannot freely choose housing, a car, or medical services. If we are talking about a market economy, then the consumer has complete sovereignty and makes decisions independently, managing his financial resources.
To each according to his needs
How broad our purchasing needs are can be understood by remembering which of our needs we provide by choosing certain goods: physiological, cultural, social, communicative, security or self-realization needs. Everyone has their own products and their own business niches that produce them. Knowledge of economics and marketing helps you make wise choices when consuming something.
The bulk of the population of our planet are people with limited financial capabilities in one way or another. Therefore, each of us had to think about the questions: “How to spend our finances correctly? What needs to be purchased first, and what should be put off for now? How to reduce expenses? How to choose the best quality product or service at an affordable price?” The theory of rational consumer behavior provides answers to all these questions. Next, we will look at the components of this section of economics in more detail.
Stages of rational behavior
The first stage is understanding the need to purchase something. The second stage is searching for information about the product you need. Then there is an assessment and analysis of this information, all possible purchase options. And finally - making a decision.
In this regard, there are several types of financial expenses with rational consumer behavior: mandatory (minimum, most necessary) expenses - on food, clothing, travel, utility bills, etc. - and discretionary: on hobbies, high-level consumer goods, travel, etc. Another type is the savings of the subject in question.
Types of reasonable behavior of consumers of goods and services from the side of the economy
Types of rational consumer behavior are divided into:
- behavior dictated by personal interest;
- behavior pursuing situational goals (immediately at the moment of choice);
- complete rationality, which assumes that a person studies information on a product or service for a long time and maximizes the benefits received;
- limited rationality, when collecting or analyzing information is difficult due to certain reasons (physical, social and other factors);
- formal (weak) rationality, especially if it is limited by factors beyond human control.
Interaction effects
The plan of each individual subject provides for activity within the framework of his preferences. There are certain effects of consumer interaction:
Snob effect. A situation is created when a purchase is made to emphasize one’s social status.
The effect of joining the majority. Expressing a desire not to be worse than people who are “successful.” Characterized by irrational demand. A purchase is made only because it was made by another person whom the buyer values and respects. Speculative demand also appears when there is a shortage of goods.
The effect of perceived quality. Products that have the same characteristics in different stores are sold at different prices.
Veblen effect. A situation in which things are demonstratively and pointedly purchased that have a very high price and are not available to most people.
Consumer behavioral analysis at a glance
An example of rational consumer behavior looks like this. Let's say you are thinking about purchasing a washing machine. First of all, you strive to evaluate all possible market offers. You study advertisements, assortment, prices, unique trade offers (discounts, promotions, the possibility of free installation or delivery), reviews. As a result, you choose the store that offers the optimal (but not the lowest) price, while providing the maximum warranty period, free delivery, installation and post-warranty service. Another option: if you are extremely limited in funds, then do not pay attention to warranty offers, but choose a machine at the lowest price.
The situational rational economic behavior of the consumer is illustrated by the following example. Let's say your phone is broken and you are expecting an important call. You don’t have time to study the market; one information is important to you - how quickly you can fix your gadget. Therefore, you choose the nearest repair service, whose technician promises to fix your phone today. The price of such a service in this case fades into the background.
Rational behavior of the manufacturer
A manufacturer is a person or organization that produces and sells goods or provides services with the aim of generating income from the rational behavior of the consumer. The costs of acquiring production resources are called costs. Profit is formed by the difference between income and costs. Its maximum value is the manufacturer's goal. To increase profits, he seeks to reduce production costs. This is facilitated by savings on raw materials, equipment of production with new equipment, reduction in energy costs, etc. Each manufacturer answers three main questions for himself: what, how and for whom he produces his product or provides a service.
To determine what exactly to produce, an analysis of the demand market, rational consumer behavior in the desired sector of the economy, production and advertising costs, etc. is carried out. The volume of production and its methods are determined. For example, you can harvest crops manually by hiring and paying a large number of workers, or you can use agricultural machinery by purchasing or renting it. The manufacturer also needs to decide for which segment of the population it produces its product. Thus, targeting the broad masses implies a larger volume of goods at a lower price than when targeting segments of society with above-average incomes.
What does the manufacturer want?
In general, the rational behavior of a manufacturer is the answer to the question: “How to get the greatest profit from a limited amount of resources?” A particular version of this question arises when one or another entrepreneur comes to the need to expand - how, with the resources available to him, can he achieve an increase in the volume of output?
For example, this problem can be solved by expanding production volumes through quantitative changes (increasing capacity, the number of natural resources and workers used), or by improving the productivity (performance) of resources. In countries with developed economies, they prefer to use the second way to solve the problem. It means an increase in labor productivity (the amount of goods produced in one unit of time by one worker). Against the backdrop of depleting mineral reserves and rising prices for products made from them, this path looks optimal.
How and due to what does labor productivity increase? Firstly, specialization in any type of activity helps. By performing the same small operation, the worker acquires better skills and his productivity increases. Secondly, the use of modern technologies makes it possible to increase the volume of production of certain goods over the same period of time. Thirdly, this factor is influenced by the professional training and quality education of employees. The quality of a product is closely related to the level of professionalism of those who work on it.
One study by a Brooklyn Institute researcher found that 28 percent of the increase in U.S. national income from 1929 to 1982 came from technological progress, 19 percent from capital injections, and 14 percent from increased worker education and training.
What conclusions can be drawn?
So, the behavior of consumers and producers is determined by reasonable reasons that ensure the most successful economic strategy. A characteristic feature of rational consumer behavior is the comparison and analysis of market offers and the ability to make financial savings. And for the manufacturer, the most important thing is to find a balance between the costs of providing the market with its product or service and its price, taking into account the competitiveness of its niche and the current demand for its offer.
Read the text and complete tasks 21-24.
The needs of society, its different layers, and each individual are so diverse that no government agency can take them into account in full and in the appropriate quality. Each item purchased by a person for personal use contains a combination of elements that are included in the final increment of his consumer wealth. As a person's means increase, he first of all demands new qualities in the objects he uses. And only with the help of the market is it possible to have flexible and effective control over the compliance of demand with the aggregate individual needs formed by human capital. The needs are related to the economic foundations of human capital, the nature of distribution, the balance of supply and demand and other problems.
The market reveals real needs, and consumption depends on its development. In other words, the market is an accumulator of welfare, the main social institution, an indisputable truth for the growth of consumption. Being the ultimate goal, consumption has an active impact on production, because the consumer... by buying the offered product of labor or refusing it, encourages the economically correct behavior of producers and punishes the erroneous behavior. As a result, they are forced to compete for the consumer, who decides independently in market conditions what, when and how much to buy.
Obviously, the main limitation for any consumer is the size of his income, and for the production process - his capabilities. Since needs are diverse and limitless, and income is limited, the individual is forced to constantly make a choice from a huge number of goods offered on the market. Naturally, when making this choice, he strives to acquire the best set of goods from those available to him, i.e. seeks to achieve the highest possible degree of satisfaction, in other words, to maximize utility with limited income.
(G.S. Khafizova)
Explanation.
The correct answer must contain the following elements:
1) answer to the first question:
The main limitation for any consumer is the size of his income;
2) answer to the second question:
As a person's means increase, he first of all demands new qualities in the objects he uses;
3) answer to the third question:
By purchasing or refusing the offered product of labor, the consumer encourages the economically correct behavior of producers and punishes the erroneous behavior of producers.
Elements of the answer can be presented both in the form of quotes and in the form of a condensed reproduction of the main ideas of the corresponding fragments of text
Source: Unified State Exam 2016 in social studies. (Part C, option 513)
Obviously, the main limitation for any consumer is the size of his income. Since needs are diverse and limitless, and income (i.e., the amount of money available to the consumer) is limited, the buyer is forced to constantly make a choice from a huge number of goods offered to him on the market. It is natural to assume that, in making this choice, the consumer seeks to purchase the best set of goods from those available with a given limited income.
There is no objective criterion for determining which set of goods is best for a given consumer. And only because the consumer chooses the “best set” of goods from his individual (i.e., subjective) point of view (remember the surprisingly accurate aphorism of K. Prutkov: “everyone thinks the best is what he has a desire for”).
Of course, the subjective approach is not flawless: a person is a complex being and does not always behave rationally in the indicated sense. Of course, the idea of consumer rationality simplifies the mechanism of his economic behavior, and yet most consumers really strive to get maximum satisfaction from their limited income.
It should be especially emphasized that behaving rationally in the market does not necessarily mean being tight-fisted and petty-calculating. One should not think that a person who spent his fortune on “a million scarlet roses” for his beloved is an irrational consumer, while another who deposited money in a commercial bank at high interest rates is, on the contrary, a rational consumer. The theory of consumer behavior recognizes both as rational consumers, if only they really chose the best (from their subjective point of view) option of consumer behavior. This means that each consumer has a kind of individual scale of preferences and, realizing it with a limited income, strives to achieve the highest possible degree of satisfaction.
Rational consumer behavior is to maximize utility given limited income.
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There are two main approaches to determining utility:
1) quantitative (cardinalist). Here we are talking about the traditional version of consumer choice theory;
2) ordinal (ordinal).
The utility that a consumer derives from an additional unit of a good is called marginal utility (MU). In turn, the sum of the utilities of the individual parts of the good gives the total utility (TU). Then marginal utility is the increase in total utility when the volume of consumption of a good increases by one unit.
Total utility of a good
The total utility curve starts from the origin because the need begins to be satisfied after a certain amount of consumption. This curve is positively sloping because as the quantity of a good increases, total utility increases.
Using the cardinalist (quantitative) theory of utility, we can characterize not only total utility, but also marginal utility, as an additional increase in a given level of well-being obtained by consuming an additional amount of a good of a given type and constant amounts of consumed goods of all other types.
Marginal utility
Most goods have the property of diminishing marginal utility, according to which the greater the consumption of a certain good, the smaller the increment in utility obtained from a single increment in the consumption of this good. This explains why the demand curve for these goods is downward sloping. Figure 8 shows that for a hungry person, the utility of the first slice of bread he consumes is high (QA), but as his appetite is saturated, each subsequent slice of bread brings less and less satisfaction: the fifth slice of bread will provide only QB utility.
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ORDINAL (ORDINAL) UTILITY - subjective utility, or satisfaction, that a consumer receives from the good he consumes, measured on an ordinal scale.
The ordinalist (ordinal) theory of utility is an alternative to the cardinalist (quantity) theory of utility.
Marginal utility cannot be measured; The consumer does not measure the utility of individual goods, but the utility of bundles of goods. Only the order of preference for sets of goods is measurable. The criterion of the ordinal (ordinal) theory of utility involves the ordering by the consumer of his preferences regarding goods. The consumer systematizes the choice of a set of goods according to the level of satisfaction. For example, the 1st set of goods gives him the greatest satisfaction, the 2nd set - less satisfaction, the 3rd set - even less satisfaction, etc. Consequently, such systematization gives an idea of consumers' preferences regarding the set of goods. However, it does not give an idea of the differences in satisfaction with these sets of goods. In other words, from a practical point of view, a consumer can say which bundle he prefers over another, but cannot determine how much one bundle is better than another.
Ordinal utility theory is based on several axioms. Note that there is no unity among economists regarding the number and name of axioms. Some authors call it four axioms, others call it three axioms. Here we highlight the following axioms.
1. Axiom of complete (perfect) ordering of consumer preferences. A consumer making a purchase can always either name which of two sets of goods is better than the other, or recognize them as equivalent. So, for sets A and B, either A > - B, or B > - A, or A ~ B, where the sign "> -" expresses a relation of preference, and the sign "~" - a relation of equivalence or indifference.
2. The axiom of transitivity of consumer preferences means that in order to make a certain decision and implement it, the consumer must consistently transfer preferences from some goods and their sets to others. So, if A > - B, and B > - C, then always A > - B, and if A ~ B and B ~ C, then always A ~ C. From the presented ranking it follows that A gives more satisfaction than B , and B is greater than C. Therefore, A gives greater satisfaction than B. Transitivity also suggests that if the consumer does not distinguish between the alternatives A and B and between B and C, then he should always not distinguish between A and IN.
3. The axiom of the insatiability of needs states that consumers always prefer a larger quantity of any good to a smaller one. Anti-goods that have negative utility do not fit this axiom, since they reduce the level of well-being of a given consumer. Thus, air pollution and noise reduce the level of utility of consumers.
36 ticket An indifference curve depicts alternative bundles of goods that provide the same level of utility (Figure 8.1)
Indifference curves have the following properties.1. An indifference curve located to the right and above another curve is more preferable to the consumer.2. Indifference curves always have a negative slope, because rational consumers will prefer more of any bundle to less.3. Indifference curves have a concave shape due to decreasing marginal rates of substitution.4. Indifference curves never intersect and usually show decreasing marginal rates of substitution of one good for another.5. Sets of goods on curves more distant from the origin are preferable to sets of goods located on curves less distant from the coordinates. To describe a person's preferences for all sets of food and clothing, a family of indifference curves can be drawn, which is called an indifference curve map. An indifference curve map is a way of graphically depicting the utility function for some specific consumer (Fig. 8.2). In Fig. Figure 8.2 shows four indifference curves that form a family - a map of indifference curves. Bundles on indifference curves further from the origin provide the consumer with greater utility and are therefore preferable to bundles on curves less distant. In Fig. 8.2 U4>U3>U2>U1.
Rice. 8.2. Indifference curve map
A map of indifference curves gives an idea of the tastes of a particular consumer, since it illustrates the rate of substitution of two goods at any level of consumption of these goods. When it comes to the fact that the tastes of consumers are known, we mean the entire map of indifference curves, and not the current ratio of units of two goods. In a map of indifference curves, each curve connects points with the same utility.
The main working concept of ordinal utility theory is the marginal rate of substitution MRS.
The marginal rate of substitution (MRS) measures how many units of one good a consumer must give up in order to purchase an additional unit of another good. In other words, it is the ratio of the marginal utility of two goods.
Manufacturers- these are people, firms, enterprises, i.e. all those who manufacture and sell us goods and provide services. What a manufacturer receives by selling his product is called his revenue or gross income. What a manufacturer spends on acquiring production resources constitutes its costs, or expenses. The difference between revenue and costs is profit.
Manufacturer's goal in a market economy - to get as much profit as possible. To do this, he strives to reduce production costs, because the lower the costs, the higher the profit. Cost reduction is facilitated by a more economical combination of resources, the introduction of new technology, saving raw materials and energy, and much more. The problem of limited production resources forces an individual manufacturer, a company, and society as a whole to solve the problems of what, how and for whom to produce.
What to produce? Manufacturers make decisions about how to allocate resources between the production of different products; which of the goods needed by society and consumers at a given time to produce and in what quantity; whether to give priority, for example, to the production of military equipment or household equipment.
How to produce? The production of the selected volume of products can be carried out in different ways. You can cultivate the land and harvest the crops manually, involving a significant number of workers, or you can get by with fewer of them, using agricultural machinery. The use of new equipment and technology can provide a larger volume of output using existing resources. However, the manufacturer should remember that this is beneficial only if the income from the use of new equipment and technology exceeds the costs associated with their implementation.
For whom to produce? Since society unites people with different incomes and different purchasing power, producers have to decide which segments of society to target when producing goods and services, and who their potential consumers will be.
By identifying ways to effectively use resources, economic science proceeds from the rational behavior of economic entities, i.e., their desire to achieve a certain result at the lowest cost.
The rational organization of economic activity requires the manufacturer to solve a number of questions: how, with limited resources, to achieve the goals of its production? How to combine production resources so that costs are minimal? How to increase the volume of output with existing resources?
So, to solve the last problem, as we noted earlier, there are two ways: to expand the volume of production through a quantitative change in resources (increasing production capacity, the amount of natural resources used, the number of employed workers) and by improving the qualitative characteristics of resources, improving their productivity or performance.
Most countries today, faced with the problem of depletion of raw materials or their rise in price, focus on the second method of expanding the production possibilities frontier. This leads to an increase in labor productivity. Let us recall that this economic indicator of the efficiency of use of production resources is characterized by the amount of products produced per unit of time by one worker.
The factors that determine the growth of labor productivity can simultaneously be considered as factors for increasing the volume of output. What are these factors?
First of all, this is the division of labor, or the specialization of producers in any type of activity. In performing a single item or small operation, a worker can become a virtuoso, and as a result his productivity increases.
Technical progress as a factor involves the use of new, more productive equipment or technology in production, which makes it possible to increase the volume of production over a period of time, usually with fewer employees.
And finally, the level of education and professional training of workers. Skilled labor is more productive not only because it contributes to the production of more products. The higher the level of professional skill of workers, the higher the quality of the manufactured product, which means it is stronger, more durable, which will save resources associated with its production and switch them to the production of other economic goods.
Brooklyn Institute (USA) scientist Edward Denison made an attempt to quantitatively correlate the impact of various factors increasing labor productivity on the growth of production volumes. According to his estimates, 28% of the increase in real national income in the period from 1929 to 1982 in the United States was due to technical progress, 19% - due to capital expenditures (the use of material and monetary resources to organize production), 14% - due to growth educational and professional training of workers.
