Satisfactory Essays
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 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. There are five determinants of demand: 1) Income. 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 c... ... middle of paper ... ...fective influencer. Group references can really shape the preference of an individual. The Lingering Preference for ‘Ukay-Ukay’ Base from what the law of diminishing marginal utility says, it is the rule of nature that marginal utility will eventually decline. Ukay-ukay items are inferior goods. There are some wearers of ukay-ukay clothing who would not want to admit that what they are wearing is not an ukay-ukay. A new and original brand is still a status symbol in for the consumers. Given that their income increases, they would still prefer to wear a new item, and not an ukay-ukay. It is a different story, however, on the case of those who are addicted with ukay-ukay or those who would find it as a pot luck. Demand for ukay-ukay for this type of consumers is inelastic. Regardless of the change in their income, they have an increasing demand for ukay-ukay.
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