Consumer’s preference for a product depends upon his marginal utility. The additional satisfaction a consumer gains from consuming one more unit of a good or service. Marginal utility is an important economic concept because economists use it to determine how much of an item a consumer will buy. Positive marginal utility is when the consumption of an additional item increases the total utility. 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 …show more content…
A rise in a person’s income will lead to an increase in demand, a fall will lead to a decrease in demand for normal goods. Goods which demand varies inversely with income are called inferior good; 2) Consumer Preferences. Favorable change leads to an increase in demand, unfavourable change lead to a decrease; 3) Number of Buyers. The more buyers lead to an increase in demand. Fewer buyers lead to decrease in demand. 4) Price of Related Goods. (a) price of substitute goods and demand for a certain good are directly related; and (b) price of complementary goods and demand for a certain good are inversely related. 5) Expectation of Future. (a) consumers’ current demand will increase if they expect higher future prices. Their demand will decrease if they expect lower future prices; and (b) consumer’s current demand will increase if they expect higher future income. Their demand will decrease if they expect lower future income. A consumer’s purchasing behavior is influenced but not limited by the abovementioned determinants of demand. There are socio-demographic, political, marketing, and other phenomena that may be influential in the purchase behavior of a …show more content…
The price-factor goes with the perceived quality of ukay-ukay products given the fact that some ukay-ukay items, may these have been sorted or still in the halukay, are well-known foreign brands. A buyer is seemingly triumphant if it can buy a foreign-branded ukay-ukay product at a very low price which considers it as a pot luck. The marginal utility of the consumers increases in search for a pot luck. This could also explain that some Pinoys who previously experienced finding a pot luck in halukay got hooked with ukay-ukay that it is already becoming a habit, or worst,
Let’s begin with the theory of Scarcity. The concept of demand is directly relatable to the scarcity of an item. Let’s look at Jackson Pollock’s work for example. If only 20 paintings were available created by Jackson Pollock, there would be a much greater demand than if you could purchase them easily at your local art gallery.
Demand refers to how much of a product or service is desired by buyers. The quantity demanded is the amount of a product people are willing to buy at a certain price; the relationship between price and quantity demanded is known as the demand relationship. Supply represents how much the market can offer. In other words, supply is the producer's side of the market while demand is the consumer's side.
If the price for one good increases, consumers will turn to a different good to satisfy their needs (Substitute Goods, n.d.), thereby decreasing demand for the original good and increasing the demand for the substitute good.
We the consumer would rather pay less for any product that is needed or want. Ultimately we are the reason for high prices as well as low prices. Prices of products do not always stay the same and more popular products have higher prices than less popular products. These fluctuations, high prices and low prices are from the idea of supply and demand. Supply and demand defines the effect that the availability of a particular product and the desire or demand for that product has on price. Generally, if there is a low supply and a high demand, the price will be high (Investopedia). To understand the idea of supply and demand, the understanding of supply and the understanding of demand must be defined. The Law of Supply states that at higher prices, producers are willing to offer more products for sale than at lower prices, also that the supply increases as prices increase and decreases as prices decrease (Curriculum Link). The Law of Demand states people will buy more of a product at a lower price than at a higher price, if nothing changes, at a lower price, more people can afford to buy more goods and more of an item more frequently, than they can at a higher price and that at lower prices, people tend to buy some goods as a substitute for others more expensive (Curriculum Link). In todays economics these ideas are seen frequently in everyday life. The laws of supply and demand are seen in many ways in the company Apple Inc. Each year Apple Inc unveils a long awaited mobile operating system and IPhone. We can also see many aspects of the law of supply and demand in Nike Inc’s Jordan Brand. Jordan Brand has released a number of...
There are different types of goods and they are normal goods, complementary goods and substitute goods. Normal goods means when there has been an increase in income (when employers/people receive their wages/benefits) and they are more likely to buy more finished goods from different stores, the demand for the goods will increase.
benefits. When we make a decision we weigh up the costs and benefits and choose
The price of a good is the most influential factor consumer’s take into consideration. If the prices of some goods go down, this means that there is more money in a budget to be spent on other goods. However, if prices of goods rise there is less to spend on other goods. It is by this reasoning that the prices of other unrelated goods will have an effect upon the demand for any product.
The law of demand states that if everything remains constant (ceteris paribus) when the price is high the lower the quantity demanded. A demand curve displays quantity demanded as the independent variable (the x-axis) and the price as the dependent variable (the y-axis). http://www.netmba.com/econ/micro/demand/curve/
Consumers with brand loyalty are indifferent with too many choices in shopping as they tend to ignore other brands and chooses product from their preferred brand.
Figure I I .4 illustrates the effects of an increase in demand. OD is the original demand curve so that the equilibrium price is P and quantity Q is demanded and supplied.
The same effect also leads to a decrease in the consumption of good 2.on the other hand; there is an increase in the consumption of good 1 due to the income effect. The same effect also leads to decrease in the consumption of good 2. The overall effect makes the consumer of goods 1 and 2 to be less declined towards purchasing the inferior good.
Every company wants to understand why people decide to buy its products or others. Firstly, we have to understand why people buy certain kind of product. People buy products because they need them. A need is activated and felt when there is a sufficient discrepancy between a desired or preferred state of being and the actual state. (Engle£¬Blackwell and Miniard. 1995. p407 ) For example, when you feel hungry, what you needs is some food. It is very important for marketer to understand the needs of consumers. All the consumers may have the same needs, but the ways which they satisfy what they need are different. Here is a example, Chinese people would choose rice when they feel hungry, whilst British people may choose bread to satisfy their needs.
... Also important is the price of complements, or goods that are used together. When the price of gasoline rises, the demand for cars falls.
That is, it is sensitive to price change, and also to the quantity demanded. This means that if many people are consuming a good, the demand is greater than if less people are consuming the good. To further clarify, take the example of attending college. In an environment where most of an individual's peers are going to attend college, the individual will see college as the right thing to do, and also attend college to be like his peers. However, in an environment where most of an individual's peers are not going to attend college, the individual will have a decreased demand for college, and is unlikely to attend.
Types of goods will help us determine whether demand for cars is elastic or inelastic. If a good is considered to be a luxury rather than a necessity, the greater is the price elasticity of demand (McConnell & Brue, 2004). Cars can be deemed as necessary due to a need for transportation. Other types of cars can be classified as luxury. A person who needs to be able to get from one place to another will have the need for a car. An old vehicle may suffice. In such a scenario, buying a brand new car is more likely to be a luxury rather than a necessity. If car prices go up, people are more inclined to just keep driving their old vehicles. In essence, the cars already on the road would serve as substitutes for new cars. However, over a longer period of time, old cars tend to wear out and the elasticity of demand for vehicles is less.