Chapter 3-Customer Behavior
The Theory of Consumer Behavior
The principle assumption upon which the theory of
consumer behavior and demand is built is: a consumer
attempts to allocate his/her limited money income
among available goods and services so as to maximize
his/her utility (satisfaction).
Utility - amount of satisfaction derived from the consumption
of a commodity ….measurement units utils
Theories of Consumer Choice
Utility Concepts:
The Cardinal Utility Theory (TUC)
Utility is measurable in a cardinal sense
cardinal utility - assumes that we can assign values for utility,
(Jevons, Walras, and Marshall). E.g., derive 100 utils from eating
a slice of pizza
The Ordinal Utility Theory (TUO)
Utility is measurable in an ordinal sense
ordinal utility approach - does not assign values, instead works
with a ranking of preferences. (Pareto, Hicks, Slutsky)
No comments:
Post a Comment