Negative marginal utility is when the consumption of an additional item decreases the total utility. The preference of a consumer for a product is based from the two rational assumptions: (1) that all products can be ranked in an order of preference (indifference between two or more is possible); and (2) that the preference is transitive among the products with which the consumer has the same marginal utility. Consumer’s preference will eventually be transformed into demand. In principle, price is one major factor in influencing demand. The law of demand states that: all other factors being equal, as the price of a good or service increases, consumer demand for the good or service will decrease, and vice versa.
Economics is the social science that studies the behavior of individuals, households, and organizations, when they manage or use scarce resources, which have alternative uses, to achieve desired ends1. Economic reasoning is the process by which analysts study people. It has been concluded that people are molded by characteristic decisions. People choose. They seek by their choices to obtain the best possible combination of costs and benefits.
Economics is the study of how people make choices due to scarcity. Making choices is a requirement throughout our lives of which making them is inevitable. A major factor of decisions is opportunity cost. Opportunity cost is what limits our choices by limiting the resources that we are initially capable of providing. To be more specific opportunity cost is the loss of potential gain from alternatives due to another alternative being chosen.
All in all it can be said that the consuming isn’t strictly maximizing utility but that consumers are influenced by how these options are presented (Huf... ... middle of paper ... ...consumer faces. With the use of framing a producer can meet the preference and thus the needs of the consumer without the consumer knowing what his preference exactly is. In the end marketing does really have the future. Works Cited Becker, G. (1962). Irrational Behavior and Economic Theory.
A loyalty program is best seen by the consumer when benefits are clear, bringing more value than the costs of participation. A membership card could be a relationshi... ... middle of paper ... ...he bigger preference should be given to consumer’s satisfaction. Only a marginal effect could be expected from the restrictive policies like switching costs. People would still be weighing their own interest more than losses incurred by leaving the vendor. -the potential of Loyalty Programs to coerce consumers rational behaviour is put into question.
Economic evaluative criteria often rely on efficiency to measure outcomes and make decisions. Some important economic concepts that analysts and policy makers rely on are Pareto and Kaldor-Hicks efficacy criteria. Pareto efficiency criterion is defined as a trade of goods currency or services that makes at least one person better off and no one worse off. When there is a beginning distribution of goods between individuals, a change to a different distribution that makes at least one person better off without making someone worse off is a Pareto improvement. Kaldor–Hicks efficiency criteria, measures economic efficiency and has less rigorous criteria.
COST OF QUALITY cost of quality: The means is to quantify the total cost of quality-related efforts and deficiencie Quality is subjective and dependent upon the role of the assessor. Best practice is that quality is measured from the point of view of the ultimate consumer of the product or service. Failure to measure from this perspective will result in a gap between what the customer expects and what is actually delivered. Best practice also indicates that any quality assessment is a “point in time” or “dynamic” rather than static. What is perceived as quality will change over time with additional information, new choices or more experience.
THE THEORETICAL AND APPLIED RELEVANCE OF VARIED BEHAVIOUR The assumption that consumers make rational, utility-maximizing choices has played an important role in economic thought. As long as preferences remain unchanged, the consumer is expected to choose the most preferred of the available products. Thoughts about consumers' behaviour towards substitutes hold a similar position. If a consumer's preference for the most preferred alternative product declines or the product is currently unavailable, the consumer is expected to choose a close substitute. From the firm's strategic point of view, this means that the marketer of a secondary brand should make its brand similar to the most popular brand.
Bait pricing is pricing an item in the product line low with the intention of selling a higher-priced item in the line. Price lining is setting a limited number of prices for selected groups or lines of merchandise. Psychological pricing is pricing that attempts to influence a customer’s perception of price to make a product’s price more attractive. Reference pricing is pricing a product at a moderate level and positioning it next to a more expensive model or brand. Bundle pricing is packaging together two or more complementary products and selling them for a single price.
This is called the value of relationship. The theory argues you can calculate this value by the rewards minus costs. Positive relationships are ones with a positive value, the rewards outweigh the costs. Negative relationships are ones with a negative value, the costs outweigh the rewards. The Social Exchange theory provides evidence to be able to predict that a worth of a current relationship influences its outcomes.