consumer theory questions

Cost Minimization Cost Minimization Obara (UCLA) Consumer Theory October 8, 2012 21 / 51. Massachusetts Institute of Technology. » Microeconomics. It is just like the opening of a new hot restaurant that everyone is talking about. Make sure you have mastered the concepts and problem solving techniques from the following sessions before attempting the problem set: Deriving Demand Curves; Applying Consumer Theory: Labor; Problem Set and Solutions. Just Exam provide a platform to all students who want to make practice for various subject online. Consumer theory is to demand as producer theory is to supply. Download files for later. Alternatively, if prices then go down, the consumer can choose to buy more of the less expensive brand but usually will switch back to his or her preferred, more expensive brand. @Subway11 - I agree with what you are saying, but I do think that there is a component of consumer behavior that adheres to the constraints theory. Freely browse and use OCW materials at your own pace. Whenever stores have those door buster sales in which the merchandise is sold almost at cost makes me want to go to the store even if I wasn’t planning on buying anything. I always stock up because the prices are so low and they usually advertise things that I would buy anyway. It is not practical for me because I have young children and would prefer to spend that money on an amusement park. @Bhutan - I agree with you. The problem set is comprised of challenging questions that test your understanding of the material covered in the course. of the important questions to which we seek answers in this chapter. What Is a Constant Elasticity of Substitution. The income effect is another factor in consumer theory. Moreover, the costs that enter into profit arise from physical properties of the production process—how many coffee cups come from the coffee-cup manufacturing plant? Cost Minimization Cost Minization Next consider the following problem for each p ˛0 and u 2<, Cost Minimization min x2X p x s:t:u(x) u This problem can be phrased as follows: what is the cheapest way to achieve utility at least as high as u? There's no signup, and no start or end dates. For example, a consumer might prefer a bundle with extra large bottles of brand A shampoo and conditioner over a bundle of smaller bottles of brand B shampoo and conditioner. » If it is a product that everyone wants then people desire it and may even buy it just because of the buzz. Knowledge is your reward. Our mission is to provide a free, world-class education to anyone, anywhere. The income effect states that if a consumer's income increase, he or she will be able to purchase more of a desired product. If you're behind a web filter, please make sure that the domains *.kastatic.org and *.kasandbox.org are unblocked. I think I read somewhere that the average American family has $12,000 in credit card debt. Next, consumer theory looks at preferences. We prepare this platform on the base of CBSE. If the bottles are the same size, however, then the consumer might have no preference of either brand, which is called indifference. Lessons. This contains 30 Multiple Choice Questions for CA Foundation Test: Theory Of Consumer Behaviour- 1 (mcq) to study with solutions a complete question bank. Consumer Buyer Behavior Chapter Exam Instructions. This is similar to the grocery store sales when they advertise those buy one get one free specials. » Send to friends and colleagues. Economics With more than 2,400 courses available, OCW is delivering on the promise of open sharing of knowledge. Obara (UCLA) Consumer Theory October 8, 2012 20 / 51. Introduction to consumer theory: total utility and marginal utility, Utility maximization using marginal utility per dollar spent, Utility maximization with indifference curves. Learn. We begin the study of the economic behavior of the consumer by examining tastes. To log in and use all the features of Khan Academy, please enable JavaScript in your browser. Home This is why a lot of consumer advertising is geared toward opening a credit card. The theory assumes that consumers will spend only the money that they actually have and does not account for saving money. It is just like I would rather go on a family cruise then get a piece of expensive jewelry for myself. According to consumer theory, budget constraint will affect a consumer's spending decisions by limiting his or her choices. Introduction to consumer theory: total utility and marginal utility. Just because everyone says the food at this restaurant is to die for does not make me willing to wait two months to get a reservation and spend two hundred dollars for dinner. The relationship to the concept of a utility function, however, as a convenient device or as an equivalent approach to describe consumer behavior, constitutes a major element of the foundations of consumer theory. MIT OpenCourseWare is a free & open publication of material from thousands of MIT courses, covering the entire MIT curriculum. Modify, remix, and reuse (just remember to cite OCW as the source. Choose your answers to the questions and click 'Next' to see the next set of questions. A consumer often will prefer a bundle without regard to the brand, instead basing a purchase decision on something such as the number of products in the bundle or the size of the bundle. This is called the budget constraint. Conversely, if the consumer's income decreases, she usually will switch to a less expensive brand. Restrained by a budget, they will buy less expensive products if prices increase and more expensive ones if prices decrease. Consumers make these choices in an effort to maximize the benefit they receive in return for the money they spend. This is one of over 2,200 courses on OCW. If a consumer can spend only the money he or she has, then any choices that cost more must be eliminated. In most cases, the consumer will substitute the less expensive product when faced with this choice. I just wanted to add that the consumer buying behavior does change when the consumer uses a credit card. concept of consumer theory, which is therefore taken as the starting point of any analysis of consumer behavior. This is no different than the people that stood in line to get the latest reader tablet because it was a new concept that had just come out on the market. There are people that stick to their budget and don’t buy things that they can’t afford regardless of how hot the item may be. The consumer also might choose to substitute a different product that previously was too expensive for his or her budget. Courses Unit 2: Consumer Theory Learn more », © 2001–2018 The major difference is that producer theory assumes that sellers are motivated by profit, and profit is something that one can usually directly measure. Consumer theory also discusses a factor called the substitution effect. Consumer theory also discusses a factor called the substitution effect. @Comfyshoes- I know what you mean, but the price effect does make a difference. How do you decide what to produce or trade? Donate or volunteer today! So although I might be able to afford it, I think that it is too much money to spend for dinner and would choose to spend that same amount of money on other activities that would be more enjoyable for my family. To use Khan Academy you need to upgrade to another web browser. Likewise, they will buy more expensive products if their income increases and less expensive products if their income decreases. In most cases, the consumer will substitute the less expensive product when faced with this choice. The teaching assistant notes common mistakes made by students and provides problem solving techniques for approaching similar questions on the problem set and exams. Your use of the MIT OpenCourseWare site and materials is subject to our Creative Commons License and other terms of use. Just select one of the options below to start upgrading. I also think that consumer buyer behavior has to account for general buying trends that have nothing to do with income levels. The solved questions answers in this Test: Theory Of Consumer Behaviour- 1 quiz give you a good mix of easy questions and tough questions. This type of spending is addictive which is why a lot of people carry credit card debt. Made for sharing. The problem set is comprised of challenging questions that test your understanding of the material covered in the course. Make sure you have mastered the concepts and problem solving techniques from the following sessions before attempting the problem set: In the video below, a teaching assistant demonstrates his approach to the solution for problem 5 from the problem set. We don't offer credit or certification for using OCW. Attention CA - CPC standard Aspirants! » Use OCW to guide your own life-long learning, or to teach others. How can you maximize happiness in a world of scarcity. The idea behind consumer theory is that consumers will try to purchase the products that will give them the highest levels of benefit or enjoyment for the amount of money that they can afford to spend. Most department stores solicit customers in order to get them to open charge accounts with them because they know that statistically people tend to spend more when they use credit cards then when they are limited to the cash on hand as the constraints theory would suggest. A lot of department stores will offer an additional discount on top of the current discount offered in order to get you to open an account. Wikibuy Review: A Free Tool That Saves You Time and Money, 15 Creative Ways to Save Money That Actually Work.

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