Consumer theory and budget line

Register Demand Much of the preceeding material in the consumer theory section is focused on the relationship between a consumer's preferences and a utility function that represents these preferences. There are two reasons for this emphasis.

Consumer theory and budget line

History of marketing thought In the s and 50s, marketing was dominated by the so-called classical schools of thought which were highly descriptive and relied heavily on case study approaches with only occasional use of interview methods.

At the end of the s, two important reports criticised marketing for its lack of methodological rigor, especially the failure to adopt mathematically-oriented behavioural science research methods.

From the s, marketing began to shift is reliance away from economics and towards other disciplines, notably the behavioural sciences, including sociologyanthropology and clinical psychology.

This resulted in a new emphasis on the customer as a unit of analysis. As a result, new substantive knowledge was added to the marketing discipline — including such ideas as opinion leadership, reference groups and brand loyalty.

Market segmentationespecially demographic segmentation based on socioeconomic status SES index and household life-cycle, also became fashionable. With the addition of consumer behaviour, the marketing discipline exhibited increasing scientific sophistication with respect to theory development and testing procedures.

By the s, marketing began to adopt techniques used by motivation researchers including depth interviews, projective techniques, thematic apperception tests and a range of qualitative and quantitative research methods. Definition and explanation[ edit ] Consumer behaviour entails "all activities associated with the purchase, use and disposal of goods and services, including the consumer's emotional, mental and behavioural responses that precede or follow these activities.

Consumer behaviour is concerned with: As a field of study, consumer behaviour is an applied social science. Consumer behaviour analysis is the "use of behaviour principles, usually gained experimentally, to interpret human economic consumption.

Understanding purchasing and consumption Consumer theory and budget line is a key challenge for marketers. Consumer behaviour, in its broadest sense, is concerned with understanding both how purchase decisions are made and how products or services are consumed or experienced.

Consumers are active decision-makers.

Consumer theory and budget line

They decide what to purchase, often based on their disposable income or budget. They may change their preferences related to their budget and a range of other factors. Some purchase decisions are made by groups such as families, households or businesses while others are made by individuals.

When a purchase decision is made by a small group, such as a household, different members of the group may become involved at different stages of the decision process and may perform different roles.

For example, one person may suggest the purchase category, another may search for product-related information while yet another may physically go to the store, buy the product and transport it home.

It is customary to think about the types of decision roles; such as: In a family unit, the adult female often makes brand choices on behalf of the entire household, while children can be important influencers The Initiator the person who proposes a brand or product for consideration something in return ; The Influencer someone who recommends a given brand; The Decider the person who makes the ultimate purchase decision; The Purchaser the one who orders or physically buys it; The User the person who uses or consumes the product.

The importance of children as influencers in a wide range of purchase contexts should never be underestimated and the phenomenon is known as pester power.

The decision model situates the black box in a broader environment which shows the interaction of external and internal stimuli e.

The decision model assumes that purchase decisions do not occur in a vacuum. Rather, they occur in real time and are affected by other stimuli, including external environmental stimuli and the consumer's momentary situation.

The elements of the model include: In addition, the buyer's black box includes buyer characteristics and the decision process, which influence the buyer's responses. The purchase of up-market perfumes, often bought as gifts, are high involvement decisions because the gift symbolises the relationship between the giver and the intended recipient The black box model considers the buyer's response as a result of a conscious, rational decision process, in which it is assumed that the buyer has recognized a problem, and seeks to solve it through a commercial purchase.

In practice some purchase decisions, such as those made routinely or habitually, are not driven by a strong sense of problem-solving. High involvement products are those that carry higher levels of risk and are often expensive, infrequent purchases.

The consumer's purchase decision process: The strength of the need drives the entire decision process.

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Information search describes the phase where consumers scan both their internal memory and external sources for information about products or brands that will potentially satisfy their need.

The aim of the information search is to identify a list of options that represent realistic purchase options. Throughout the entire process, the consumer engages in a series of mental evaluations of alternatives, searching for the best value.

Towards the end of the evaluation stage, consumers form a purchase intention, which may or may not translate into an actual product purchase. The stages of the decision process normally occur in a fixed sequence.

Problem recognition[ edit ] The first stage of the purchase decision process begins with problem recognition also known as category need or need arousal. This is when the consumer identifies a need, typically defined as the difference between the consumer's current state and their desired or ideal state.

A simpler way of thinking about problem recognition is that it is where the consumer decides that he or she is 'in the market' for a product or service to satisfy some need or want.

The strength of the underlying need drives the entire decision process. These are typically expensive purchases, or purchases with high social visibility e.

Consumer theory and budget line

Routinized problem-solving Repeat purchases or habitual purchases Consumers become aware of a problem in a variety of ways including: Regular purchase When a consumer purchases a product on a regular basis e.Demand.

Much of the preceeding material in the consumer theory section is focused on the relationship between a consumer's preferences and a utility function that represents these preferences.

Price Line or Budget Line: Definition and Explanation: The understanding of the concept of budget line is essential for knowing the theory of consumer’s equilibrium. "A budget line or price line represents the various combinations of two goods which can be purchased with a given money income and assumed prices of goods".

Innovation is a defining feature of novelty in complex technological, sociocultural, and biological systems. Theories of innovation offer principles on which the practices of innovation are based as well as the connections between theory and practice.

This can be understood by the economic concept of consumer budget. The concepts of budget line, budget set and slope of the budget are explored here. Read on. Have you ever prepared a monthly budget?

How do you decide how much of a good to buy? > Theory of Consumer Behaviour > Consumer Budget. Theory of Consumer Behaviour.

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Consumer behaviour is the study of individuals, groups, or organizations and all the activities associated with the purchase, use and disposal of goods and services, including the consumer's emotional, mental and behavioural responses that precede or follow these activities.

Consumer behaviour emerged in the s and 50s as a distinct sub-discipline in the marketing heartoftexashop.com order to succeed.

Intro Note: Quiz 1 can be picked up at Distribution Center. Second Quiz covers: Preferences, Budget and Optimal Choices. Core of theory of demand: how does demand change in di⁄erent.

EconPort - Handbook - Consumer theory - Demand