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Utility theory and consumer behavior. Theory of consumer behavior. Consumer behavior as an object of economic theory

Conclusion

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Introduction

Consumer behavior is the process of forming the demand of buyers who select goods taking into account prices and personal budget, i.e. own cash income. It is known that monetary income has a direct and immediate impact on demand, and prices have a direct impact on the quantity of goods purchased. This influence can be traced through the characteristics of consumer behavior, which the entrepreneur takes into account in his pricing policy. An entrepreneur must know quite clearly how much prices for higher quality goods should be increased and what the limit of this increase is. Or, conversely, how much should the price be reduced without risking trade revenue if demand for a given product decreases. The answers to these and similar questions are also related to the study of the characteristics of consumer behavior.

The behavior of buyers and their choice in the world of goods is of a purely individual nature. Each buyer is guided by his own tastes, attitude to fashion, product design and other subjective preferences. Here it is only possible to group buyers according to socio-demographic factors: the total population of a given region; distribution by age composition; number of men and women; characteristics of their employment and lifestyle, etc.

In recent years, our country has increasingly used sample statistical methods to improve the methodology of socio-economic and marketing surveys.

At the same time, it must be noted that in the specialized literature, works focused on the study of consumer behavior and the analysis of such important concepts as preferences, needs, tastes, etc. are not widely represented.

The above indicates the relevance in scientific and practical terms of studying the factors that determine the behavior of buyers in any market, with its features of the formation, functioning and development of market relations.

The purpose of the course work is to study consumer behavior patterns

The purpose of the work determined the nature of the tasks posed and solved by the author:

consider consumer behavior as an object of economic theory;

study the basic models of consumer behavior in the economy.

The theoretical and methodological basis of the course work was the works of domestic and foreign scientists in the field of economics and statistics.

The structure of the course work consists of an introduction, two main chapters, a conclusion and a list of references.

1. Consumer behavior as an object of economic theory

1.1 Theory of consumer behavior

Most of the modern research into the behavior of market actors is devoted to the problems of the manufacturing company, i.e. consideration of production problems at the micro level. But the main idea of economics is that “an economic system operates best when it satisfies the desires of the consumer, which are manifested in his behavior in the market.” In the system of economic relations, the central role belongs to the consumer. It is he who is the bearer of the target function of social production. It is he who, acting in feedback mode on the producer, ensures adjustment of the latter’s activities in the direction of more fully meeting social needs. In the absence of this connection (in the conditions of an administrative-command economy), the economic system is deprived of its “internal engine” of development and is doomed to degradation. In the end, it is precisely by realizing its function as a consumer that this agent of economic relations ensures the full reproduction of human capital - the most valuable resource of social production today. Moreover, consumer behavior largely determines labor, savings and other types of economic activity, determines the types of economic behavior that act in many ways as tools that enable its implementation.

The theory of consumer behavior is one of the oldest branches of economic theory. However, today this area of research, at least in the domestic literature, is almost completely “at the mercy” of applied market research and is considered mainly as a branch of marketing. All that this area of research “owes” to economic theory is that the latter “gave birth to marketing,” from which, in turn, the area under consideration spun off. The connection with economic theory thus turns out to be very indirect. In the works of economists devoted to the study of consumer behavior, the applied nature of the research and the corresponding understanding of its subject are emphasized in the definition itself. Thus, D. Angel, R. Blackwell and P. Miniard point out that the study of consumer behavior “is traditionally understood as finding out why people buy - in the sense that it is easier for the seller to develop strategies for influencing consumers when he knows why buyers buy certain products or brands."

Such an applied, purely “marketing” approach to understanding the content of the category “consumer behavior” seems very narrow. After all, as L. Robbins puts it, “economics is a science that studies human behavior from the point of view of the relationship between goals and limited means, which can have different uses.” Thus, consumer behavior, without a doubt, is the subject of economics as a whole, and not just its “specialized field” - marketing.

Consumer behavior (as well as human behavior in general) is studied by a whole range of social sciences. Thus, consumer behavior is an interdisciplinary field of study. What determines the specifics of the subject of economic science in the field of human behavior in general and consumer behavior in particular?

Very fruitful for understanding the essence of economic behavior is, in our opinion, the concept of Nobel Prize winner G. Becker, according to which economic theory as a scientific discipline differs most from other branches of social science not in its subject, but in its approach, which involves maximizing the behavior of the individual. This approach does not assume that individuals are driven solely by selfish interests and considerations of material gain; G. Becker calls this understanding an expression of simplified ideas about the selfish nature of human interests. People's behavior is guided by a much richer set of values and preferences. This approach assumes "that individuals maximize their well-being as they perceive it, regardless of whether they are egoists or altruists, loyal people, ill-wishers or masochists." Let us note that in this regard, it is difficult to overestimate the role of institutions (especially the state) as a special factor in shaping people’s ideas about the criteria of their well-being.

In accordance with existing definitions, economic behavior in general and consumer economic behavior in particular are not only certain actions; it is a “set of perception and behavior,” in other words, it is behavior as a set of actions, as well as what precedes these actions and what accompanies them (in this case, consumer expectations, assessments, moods). D. Angel, R. Blackwell and P. Miniard characterize consumer behavior as follows: “Consumer behavior is the activity aimed directly at obtaining, consuming and disposing of products and services, including the decision-making processes that precede and follow these actions.” Apparently, defining consumer behavior simply as a set of actions and behaviors would be too narrow. It can be argued that consumer behavior is one of the varieties of economic behavior, including the conscious actions of the consumer in the spheres of circulation and consumption, aimed at satisfying their own needs, previous intentions, as well as the results of these actions, expressed in a certain degree of consumer satisfaction.

1.2 Phases of consumer behavior

According to this working definition, consumer behavior consists of several phases:

Thus, consumer behavior as an object of economic theory is a complex economic category, essentially reflecting a whole set of economic relations, processes and phenomena.

Let us note that this form of implementation of consumer behavior in the “pre-action” phase, such as the formation of consumer sentiments, assessments, etc., simultaneously acts as one of the factors of consumer behavior in its active phase.

In neoclassical economic theory, which uses the principle of methodological individualism for its “economic man,” a kind of “substitution of concepts” occurs. In their discussions about the characteristics of consumer behavior, economists traditionally consider the individual as a subject. On the other hand, a certain community, a group - a household, which, like the company, acts as a classical subject of activity in economic theory, is considered as an “atomic” consumer entering into economic relations with a manufacturer (firm). Thus, households are considered as individuals, and this is not entirely correct.

Avoiding such blurriness and duality in understanding the economic content of the category “consumer” allows us to introduce an additional level of relationships into the analysis - the so-called nanolevel. The terms “nanoeconomics”, “nanolevel” were introduced in economic literature in Russian by G. Kleiner, and the term “nanoeconomics” first appeared in the work of K. Arrow in 1987. "Nano" (Greek) is an extreme version of "micro". Nanoeconomics is proposed to be understood as “both the economic system itself, considered from the point of view of the behavior of individual individuals (“economics of individuals”), and the scientific discipline that studies it.” We are talking about “the personal factor of economic activity, a reflection of economic reality (macro- and microeconomics) through the prism of the individual, embodied in relationships, motives, values, expectations, interests...”.

G. Kleiner builds the following levels in the structure of economic systems “from highest to lowest”: megaeconomics (world economy), macroeconomics (country economy), mesoeconomics (industrial, regional, group economics), microeconomics (enterprise economics), nanoeconomics (describing motivation and factors of individual economic behavior). Obviously, it is right to include a household in microeconomics. The personal factor, which represents the nano-level, necessitates the need to take into account individual reactions and attitudes, psychological factors when pursuing economic policy and constructing certain economic models.

J. Katona, the founder of economic psychology, proposed the first project of empirical research into the psychological aspects of economic behavior. His approach involves a clear distinction between economic and socio-psychological variables, the latter of which operate at the level of the individual rather than at the level of groups or masses. These psychological variables that form decisions on purchases of durable goods and savings (in addition to objective factors - income, interest on loans, etc.) are called intermediate by J. Katona, since any impact of objective economic factors on consumption and savings goes through them. These are opinions, expectations, moods, claims - everything necessary for a person’s objective purchasing power to translate into real purchases. Intermediate variables, and through them consumer spending, are influenced by economic, institutional, and political factors. In addition, it depends only on the internal state of a person, on the predominance of an optimistic or pessimistic mood, what weight he attaches to certain factors.

In addition, it should be noted that there are (and operate at the nanolevel, and through it at the microlevel) purely psychological factors, laws, patterns that lie on the side of individual psychology. At different stages of the development of economic theory, these psychological laws were involved in arguments that substantiate the rationality of economic man (for example, the law of marginal utility, on the basis of which the demand curve is constructed, operates at the nanolevel), or refuting it.

Let us now dwell on the factors of consumer economic behavior. From the point of view of the general approach to consumer behavior, it is formed under the influence of such basic factors as needs, income and prices. This approach, however, seems too general. The fact is that the consumer is “one of four persons,” since his reactions are formed, exist and are realized simultaneously on four levels. In the field of the nanolevel, an individual is formed with certain needs, attitudes, and a system of values. At the micro level, he acts as a representative of a household that carries out economic interaction with other households, firms, and the state. At the meso level, the individual already acts as an “aggregate regional consumer”, represented by aggregate consumer demand at the regional level; at the macro level - as the “aggregate consumer”, represented by aggregate consumer demand at the level of the country as a whole.

1.3 Factors determining consumer behavior

Let us highlight factors of different levels that determine consumer behavior. They are specific to each level. At the same time, factors of each level are influenced by factors of another level and, thus, interact and intertwine.

At the nanolevel (the level of expectations, sentiments, claims of the individual economic agent-consumer), individual psychological factors that are specific to this level and have a specific origin operate. These, according to J. Katone, are “intermediate variables,” since it is through them that the direct impact of objective factors on behavior ultimately occurs. At the same time, factors at a given level (let's call them nanofactors) are influenced by micro-level factors - microfactors (for example, certain changes in the distribution of income, dynamics and price ratios, consumer sentiment, intentions).

Changes at the macro and meso levels (for example, the rise of inflation, changes in government income policy, the establishment of price controls, regulation of foreign trade and exchange rates, changes in regional social policy, shifts in the sectoral structure of employment in the region) also affect nanofactors.

In turn, nanofactors have a reverse impact both on factors of economic behavior operating at the macro and meso levels (for example, massive waves of pessimism lead to an increase in inflation expectations, to the development of rush demand, inflation) and on micro factors (for example, the psychological law of marginal utility determines the patterns of demand formation).

At the micro level - the household level - factors such as income distribution and the formation of market prices operate. These microfactors themselves, as has already been shown, are affected by nanofactors. Macro and meso factors also influence incomes and prices.

In turn, micro-level factors have been shown to act on nanofactors - individual consumer attitudes. The micro-level also has a mediating influence on consumer behavior through its influence on macro-level factors (as illustrated by the wage-price inflation spiral).

At the meso level, the factors determining consumer behavior are the general economic and demographic situation in the region, the level and rate of inflation, the sectoral structure of employment, the saturation of the regional consumer market, etc. All of them, in turn, are influenced by factors at other levels and themselves largely determine them.

At the macro level, there are such factors of consumer behavior (inflation, general economic situation, etc.), which also, on the one hand, partly mediate the effect of factors at other levels (income distribution, prices, expectations, sentiment, etc.), and on the other hand, on the other hand, they themselves influence factors at other levels (on moods, norms of consumer behavior at the micro level).

consumer behavior demand rationality

In the system of factors of consumer economic behavior, a special place is occupied by institutional factors, which can also be “decomposed” into groups of factors of different levels. They are also interconnected, interacting and influence both each other and other, non-institutional factors at different levels. At the macro level, these are, first of all, the institutions of state and law and the normative and legislative acts generated by these institutions; in addition, these are national norms, rules, guidelines, traditions of consumer behavior, “cultivated” by society as a whole represented by the state and various institutions of civil society, in particular through the media. At the meso level, the situation is determined by the relevant regional institutions. At the micro level, this is primarily the institution of the family, which forms certain rules and norms of household consumer behavior. At the nanolevel, informal rules of economic behavior - consumer attitudes and stereotypes, determined not least by historical and cultural factors - dominate to a large extent.

There is a well-known position according to which institutions are a factor that deviates a person’s actions from the actions prescribed to him by the model of “economic homo.” It seems that this is not entirely true. A rational actor maximizes utility, subject to existing resource constraints. Institutions “intervene” in the model of “homo economicus” both at the level of the target function and at the level of restrictions. They adjust the target function, enriching it with new settings dictated by tradition, culture, etc. (let's say the fashion institute creates new needs). Under the influence of institutions, a transformation of restrictions also occurs (this happens, say, when a person takes into account rules and norms when making a particular decision). In any case, the influence of institutions, apparently, does not “cancel” the maximizing essence of human nature: simply, the criteria of “utility” are expanded, new elements are included in their composition, which, under the influence of forces “external” to man, turn into “internal”. Constraints are also transformed from external to internal, i.e. “appropriated”, accepted on a personal level, internalized.

This process of internalization of new “market” values for the “Soviet man”, dictating new attitudes to him, occurred (and continues to occur) before our eyes during Russia’s transition to a market economy. Unfortunately, in our case, this process practically did not affect the other side - the side of restrictions. Due to the weakness, unpreparedness for market transformation of “external” institutions (primarily the institution of law) and the peculiarities of the domestic mentality, legal and moral restrictions inherent in a society developing normally in a market economy, even if they are formally formalized in the form of normative legal acts and rules “do not work,” primarily because their internalization does not occur.

It should be noted that consumer behavior is not only determined by a complex (system) of multi-level factors, but also at each level it receives specific forms of implementation that are adequate to a given level. At the macro- and meso-level, the main form of implementation of consumer behavior is aggregate consumer demand; at the micro level - household demand, its consumer spending; at the nanolevel - these are individual consumer decisions regarding purchases associated with certain moods, assessments, psychological reactions, etc. - picture 1.

Figure 1 - Factors influencing purchasing behavior

Let us note in conclusion that the economic behavior of the consumer has specificity not only in the forms of implementation and formation factors belonging to different levels, but also in its nature and patterns that manifest themselves in the conditions of different economic systems.

2. Basic models of consumer behavior in the economy

2.1 Model of economic man

Since its inception as an independent field of knowledge, economic theory has used the model of economic man. The creation of such a model is due to the need to study the problem of choice and motivation in the economic activities of individuals. But as Simon rightly noted, the efforts of economists were aimed mainly at studying the results of choice in the economic sphere, and choice itself as a process fell out of the field of economic analysis: “neoclassical theory studies, in fact, not the process of choice, but its results.”

The attention of economists to the problem and mechanism of economic choice and the conditions mediating this choice led to a revision of the classical model of the economic consumer within the framework of institutionalism.

But first it is necessary to briefly consider the premises on which the neoclassical model of economic man is based.

It should be noted that the main element of the concept of economic man, rationality, is as complex for scientific analysis as this concept seems simple from the point of view of ordinary consciousness.

Rationality can be defined as follows: a subject (1) will never choose alternative X if at the same time (2) alternative Y is available to him, which, from his point of view (3), is preferable to X.

In modern scientific literature, the acronym REMM is used to denote the economic man, which means "resourceful, evaluating, maximizing man." This model assumes that a person behaves completely rationally regarding the extraction of utility from economic goods. This provides the following conditions:

1) the information necessary for making a decision is fully available to the individual;

2) a person in his actions in the economic sphere is a complete egoist, i.e. he is indifferent to how the well-being of other people will change as a result of his actions;

3) there are no external restrictions on exchange (provided that exchange leads to utility maximization);

4) the desire to increase one’s well-being is realized only in the form of economic exchange, and not in the form of seizure or theft.

Such assumptions have led to accusations against modern orthodox economics that it has become essentially “blackboard economics” and completely out of touch with real life.

But rationality is not all that determines the behavior of an economic agent. He does not exist separately from surrounding objects and agents like him, so it is necessary to consider the limitations that a person faces in the process of making a decision or making a choice.

The neoclassical theory here proceeds from the assumption that all consumers know what they want, that is, everyone has their own set of needs known to them, which are also functionally related. To simplify the analysis, neoclassicals took an “average” utility function, which does not take into account either the variety of maximization opportunities at a constant income, or the differences between subjective aspirations to use available resources and objective opportunities. Therefore, since preferences are known, the solution to the utility function will be to determine the unknown outcomes of individual choice.

However, the value of a theory that predicts the choice of a consumer or other economic entity will be high when the surrounding situation remains relatively stable, and the potentials inherent in it are available for acceptance and processing by human capabilities. Moreover, there are, in addition to the above external ones, also internal obstacles, from which the neoclassicists simply abstract.

Following the neoclassics, one can imagine a person as a perfect being, completely in control of himself and his own actions, that is, determining the latter by a single criterion - his own utility function. In addition, he leaves aside the preferences of other subjects, which can positively or negatively affect his decisions, and also assumes the absence of a relationship between the goal and the means. One and the other are taken to be already known in advance and the possibility that when considering a chain of sequential actions the goal can become a means and vice versa is absent.

Thus, it can be noted that the absence of any prerequisites about the possibility of influence of the decisions of some people on the decisions of others separates the orthodox theory from the sociality of economic science.

2.2 Typologies of rationality and following one’s interests

According to O. Williamson's classification, the following two main models of rational behavior are used in economic theory:

Let's take a closer look at these models:

1. Rationality.

According to O. Williamson, there are 3 main forms of rationality:

1) maximization. It involves choosing the best option from all available alternatives. This principle is adhered to by neoclassical theory. Under this premise, firms are represented by production functions, consumers are represented by utility functions, the allocation of resources between different areas of the economy is taken for granted, and optimization is pervasive;

2) bounded rationality - a cognitive premise that is accepted in the economic theory of transaction costs. This is a semi-strong form of rationality, which assumes that actors in economics strive to act rationally, but in reality only have this ability to a limited extent.

This definition allows for different interpretations. Economists themselves, accustomed to considering rationality as categorical, classify bounded rationality as irrationality or irrationality. Sociologists consider such a premise to be too great a departure from the relative behavioral precision accepted in economic theory.

That is, they say that adherents of the transaction cost theory further blur the boundaries of uncertainty accepted in the classical theory. However, the economic theory of transaction costs explains this duality by the need to combine in one motive the focus on the economical use of limited resources and the desire to study institutions as behavioral patterns in conditions of limited information.

This theory takes such a limited resource as intelligence as one of its most important premises. There is a desire to save money on it. And to do this, they either reduce costs during the decision-making processes themselves (due to personal abilities, possession of a large amount of information, experience, etc.), or turn to the help of power structures.

3) Organic rationality - weak rationality of the process. It is used in the evolutionary approach by Nelson, Winter, Alchian, tracing the evolutionary process within one or several firms. This form of rationality is inherent in humans from the very beginning. Also, representatives of the Austrian school K. Menger, F. Hayek, I. Kirzner connect it with processes of a more general nature - the institutions of money, markets, aspects of property rights, and so on. Such institutions "cannot be planned. The general scheme of such institutions does not mature in anyone's mind. In fact, there are situations in which ignorance "proves even more "effective" in achieving certain goals than knowledge of these goals and conscious planning for their achievement." .

Forms of organic and bounded rationality are complementary, but are used by different schools to achieve different goals, although the study of institutions as ways to reduce transaction costs by neo-institutionalists and the clarification of the viability of institutions by the Austrian school are closely related.

Focus on self-interest.

1) Opportunism. In the new institutional economics, opportunism is understood as “following one’s interests, including by deception, including such obvious forms of deception as lies, theft, fraud, but hardly limited to them. Much more often, opportunism implies more subtle forms of deception that can take active and passive form, manifest ex ante and ex post." In the general case, we are talking only about information and everything connected with it: distortions, hiding the truth, confusing a partner.

Ideally, there should be harmony in the process of information exchange - open access on both sides, immediate communication if information changes, etc. But economic agents, acting opportunistically, manifest this to varying degrees. Some are more prone to deliberate deception, others less. This creates information asymmetry, which greatly complicates the tasks of economic organization, because in the absence of opportunistic behavior, all behavior could be subject to some rules.

Neutralization of opportunism can be carried out by the same proactive actions or, as mentioned above, by concluding a contract in which both parties would agree on all the points on which they do not trust each other.

2) Simply following one’s interests is the version of egoism that is accepted in neoclassical economic theory. The parties enter into the exchange process knowing in advance the starting positions of the opposite party. All their actions are stipulated, all information about the surrounding reality that they will have to deal with is known. The contract is fulfilled because the parties follow their obligations and rules. The goal is achieved. There are no obstacles in the form of non-standard or irrational behavior, or deviations from the rules.

3) Obedience. The last, weak form of self-interest orientation is obedience. Adolf Lowe formulates its essence as follows: “One can imagine an extreme case of monolithic collectivism, where planned tasks are carried out in a centralized manner by functionaries who fully identify themselves with the global tasks assigned to them.” But in its pure form, this type hardly exists in economics, so it is more likely to be applied to the study of the evolution of human socialization than to explaining motives when making decisions, since others decide for him.

2.3 Behavioral premises adopted in modern institutionalism

First of all, the possibility of abstracting from the system of preferences that is formed within a person was called into question. This is a system of values, goals, behavioral stereotypes, habits of individuals, psychological and religious types, which directly indicates that the individual makes his own choice. That is, institutionalists determine rather the nature of the situation in which the choice is made, rather than considering the result obtained within the framework of the interaction of many people. Therefore, this approach involves the inclusion of a historical aspect that looks at the evolution of a person attached to a specific culture, society, group and existing at a certain time.

The next feature of institutional theory follows from the previous one: since the assumption about the exogeneity of the system of restrictions is incorrect, then, therefore, if a person does not have the full amount of information necessary for free orientation in the world around him, then he is not able to fully reflect the processes of individual and public life. Then how can one trace the process of selecting reality and their decoding as a prerequisite for making a choice?

To address these issues within the framework of modern neo-institutional economics, two behavioral premises are used - bounded rationality and opportunism.

A more radical approach is found in the work of Herbert Simon. Simon suggests replacing the principle of maximization with the principle of satisfaction, since in complex situations following the rules of satisfactory choice is more profitable than attempts at global optimization.

This position may be consistent with the concepts of the Austrian school, within which, instead of maximizing utility, the premise of the comparative importance of needs and their best satisfaction with the least possible amount of goods is used.

Simon notes that in economic theory the concept of satisfaction does not play such a role as in psychology and motivation theory, where it is one of the most important. According to psychological theories, the urge to action arises from unsatisfied aspirations and disappears after they are satisfied. The conditions for satisfaction, in turn, depend on the level of aspiration, which depends on life experience.

Adhering to this theory, we can assume that the company’s goal is not maximization, but achieving a certain level of profit, maintaining a certain market share and a certain sales volume.

This is confirmed by statistical data. This is also consistent with the studies of Hall and Hitch (cost-plus-standard markup pricing) and Cyert and March (firms in a stable market position act less aggressively).

Within the old institutionalism, the neoclassical concept of economic man and “given preferences” is constantly criticized.

First, the old institutionalists say that it is necessary to take into account the influence of the learning process on the formation of the behavioral preconditions of individuals. Learning in its broadest sense is more than just discovering or receiving information; learning is the transformation of individual qualities and preferences, which is tantamount to changing the individual personality. Today we don't like a piece of art, but after an exhibition we can develop a taste for it. Learning has the power to transform an individual. In other words, learning can influence preferences, goals, qualities, skills and values. Strictly speaking, the very act of learning implies incompleteness of available information, thereby excluding perfect rationality. To include learning within the framework of the concept of a utility-maximizing, rational agent, the scope of this concept must be significantly narrowed. Finally, learning is the development of methods and means of cognition, calculation and evaluation. If the methods and criteria of “optimization” are themselves the object of study, then how can learning itself be optimal?

Secondly, when analyzing economic behavior, it is important to take into account the role of habits. Habits themselves are formed through repetition of an action or thought. They are determined by previous activity and have stable, self-sustaining properties. Through habits, individuals make judgments about their own unique history. Habits are the basis of both reflexive and non-reflective behavior. For humans, habits themselves are vehicles for deeper thinking and conscious decision.

However, habit does not mean behavior. There is a tendency towards a certain type of behavior in certain types of situations. Of course, we may have habits that have remained dormant for a long time. A habit can exist even if it does not manifest itself in behavior. Habits are a hidden repertoire of potential behavior; they can be caused by an appropriate stimulus or situation.

The acquisition and modification of habits is the central point of the existence of an individual person. Let's say that thinking largely depends on acquired language habits, and at the same time becoming more colorful. Moreover, in order to realize the essence of the world, we need to acquire the habit of classification and of finding commonly associated meanings. The important thing is that all actions and thoughts depend on the primary habits that we acquire in the process of individual development. Consequently, habits are temporally and ontologically primary in relation to intentions and thinking. As we have seen, the action of transformative downward causation is expressed in the creation and formation of habits. Habit is a key hidden link in the causal chain.

Accordingly, since we can explain how institutional structures create new habits or change existing ones, we have a plausible mechanism for transformative downward causation. On the contrary, it is not possible to identify any causal mechanism that would mediate the direct influence of institutions on the transformation of goals and beliefs.

Third, the importance of habits is realized by accepting the assumption of downward causation. The concept of "downward causation" first appeared in psychology, in the work of Nobel Prize winner, psychologist and biologist Roger Sperry. Along with other scientists, K. Popper paid attention to this topic. In this literature, the concept of “downward causation” has weak and strong forms. A relatively weak form is manifested in the action of evolutionary laws on populations. All processes at the lower levels of the ontological hierarchy act in accordance with the laws of the higher levels and are restrained by them. In other words, if a system has certain properties and development trends, then the individual components of the system function in accordance with them. For example, the distribution of organisms that form a population is constrained by the processes of natural selection.

The broader concept of downward causation - "transformative downward causation" (according to Hodgson) - covers both individuals and populations not only limited by certain factors, but also changed as a result of the action of causal forces associated with higher levels.

A representative of old institutionalism, J. Dusenberry, developed a model of consumer behavior based on the effects of habits and learning. According to this model, as incomes increased, individuals developed new consumption habits that persisted even after incomes declined over time. Their tastes and preferences changed as soon as they began to lead a new lifestyle. This model of aggregate consumer behavior has successfully passed several econometric tests. However, Dusenberry's model failed to gain acceptance, not because it failed statistical testing, but because it was not based on the mainstream idea of a rational, utility-maximizing consumer.

As J. Hodgson rightly noted, the act of thinking within a tangled collection of overlapping habits ultimately involves no more individual freedom than that enjoyed by a utility-maximizing robot in mainstream economics. Indeed, it is a myth that an individual programmed to maximize his utility according to some given preference function is free. Mainstream economics seeks to combine both things: the ideology of individual freedom with a model of predictable human choice. Traditional institutionalists, in contrast, argue that, on the one hand, choice is a largely unpredictable outcome of the functioning of a complex human nervous system, which is influenced by a complex, open and changing environment. On the other hand, our choice is influenced by heredity, upbringing and circumstances.

So, consumer behavior is neither gratuitous (unconditional) nor absolutely predictable.

Conclusion

After conducting this study, the following can be noted:

Consumer behavior as an object of economic theory is a complex economic category, essentially reflecting a whole set of economic relations, processes and phenomena. This set is united by a system of cause-and-effect relationships and can be presented in the form of a diagram.

Consumer behavior consists of several phases:

the “pre-action” phase - the formation of sentiments and assessments that precede specific consumer decisions and actions;

the phase of consumer action to acquire goods - purchasing market goods or acquiring them in some other way;

the phase of obtaining consumer satisfaction (effect), including the process of production of basic consumer goods (preparing market goods for consumption and their consumption).

The economic behavior of the consumer has specificity not only in terms of forms of implementation and formation factors belonging to different levels, but also in its nature and patterns that manifest themselves in the conditions of different economic systems.

According to O. Williamson’s classification, the following two main models of rational behavior are used in economic theory

1) rationality (as such);

2) following your interests.

The absence of any prerequisites about the possibility of influence of the decisions of some people on the decisions of others separates the orthodox theory from the sociality of economic science.

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The pure theory of consumer demand considers an individual as a person with a certain income, which he spends on goods offered by the market at certain prices in such a way as to obtain maximum satisfaction. The pure theory of exchange considers two parties, each of which has a certain amount of a good and wants to purchase the other party's goods. Each party exchanges part of its own goods for part of the partner's goods until the further acquisition of the next portion of the goods does not require a greater sacrifice from him than the value of this acquisition for him. We can say that at this point each party receives the most satisfying set of goods and, in a certain sense, the satisfaction of both parties is maximized.

Supply and demand are interdependent elements of the market mechanism, where demand is determined by the solvent needs of buyers (consumers), and supply is determined by the totality of goods offered by sellers (producers); the relationship between them develops into an inversely proportional relationship, determining the corresponding changes in the level of prices for goods.

Demand is depicted as a graph showing the quantity of a product that consumers are willing and able to buy at some price possible over a certain period of time. It shows the quantity of a product for which (other things being equal) will be demanded at different prices. Demand shows the quantity of a product that consumers will buy at various possible prices.

The following non-price determinants influence demand:

1. Consumer tastes. A change in consumer tastes or preferences favorable to a given product will mean that demand has increased at each price. Unfavorable changes in consumer preferences will cause a decrease in demand and a shift of the demand curve to the left. Technological changes in the form of a new product can lead to changes in consumer tastes. Example: physical health is becoming increasingly popular (at least in the West), and this increases the demand for sneakers and bicycles.

2. Number of buyers. An increase in the number of buyers in the market causes an increase in demand. And the decrease in the number of consumers is reflected in a decrease in demand. Example: The post-World War II baby boom increased demand for diapers, baby lotion, and obstetric services.

3. Income. The demand impact of changes in money income is more complex. For most goods, an increase in income leads to an increase in demand.

Goods for which the demand changes in direct proportion to changes in money income are called goods of the highest category, or normal goods.

Goods for which demand changes in the opposite direction, that is, increases as income decreases, are called inferior goods (this issue will be discussed below).

Example: An increase in income increases the demand for goods such as butter, meat, and reduces the demand for used clothing.

4. Prices for related goods. Whether a change in the price of a related good will increase or decrease the demand for the product in question depends on whether the related good is a substitute for our product (a fungible good) or a companion to it (a complementary good). When two products are substitutes, there is a direct relationship between the price of one and the demand for the other. When two goods are complements, there is an inverse relationship between the price of one and the demand for the other. Many pairs of goods are independent, stand-alone goods; a change in the price of one will have little or no effect on the demand for the other. Examples: reductions in air passenger fares reduce demand for bus travel; a reduction in the price of VCRs increases the demand for video cassettes.

5. Waiting. Consumer expectations about future commodity prices, commodity availability, and future income can change demand. The expectation of falling prices and lower incomes leads to a reduction in current demand for goods. The converse is also true. Example: Unfavorable weather in South America raises expectations of higher coffee prices in the future and thereby increases current demand for it.

Giffen's paradox

When prices for certain goods increased, demand increased instead of the expected decrease. The English economist Robert Giffen (1837-1910) was the first to draw attention to this group of goods. These goods are called goods of the lower order. It is believed that Giffen described this effect when he observed how poor working families increased their consumption of potatoes, despite their rise in price. The explanation comes down to the fact that potatoes take up a large share of food expenses in poor families. Such families can rarely afford other food. And if the price of potatoes rises, then the poor family will be forced to refuse to buy meat altogether.

The intersection of the supply and demand curves determines the equilibrium price (or market price) and the equilibrium quantity of output. Competition makes any other price unsustainable.

Excess demand or shortage accompanying prices below the equilibrium price indicates that buyers need to pay a higher price in order not to be left without a product. The rising price will

1. encourage firms to redistribute resources in favor of the production of a given product

2. push some consumers out of the market.

Excess supply, or excess output occurring at prices above the equilibrium price, will induce competing sellers to reduce prices to get rid of excess inventory. Falling prices will

3. suggest to firms that it is necessary to reduce the resources spent on the production of these products and

4. will attract additional buyers to the market.

In order to attract the consumer’s attention to a particular product, it is necessary to find out: who exactly buys, how exactly he buys, when exactly he buys, where exactly he buys and why exactly he buys. A company that truly understands how consumers react to various product characteristics, prices, advertising arguments, etc. will have a huge advantage over its competitors.

Consumer behavior

Actions directly related to the acquisition, consumption and disposal of products, services, ideas, including decision-making processes that precede these and subsequent actions, characterize consumer behavior. Need, arising from the need or desire to consume various wealth (both material and spiritual), is considered to be the economic motive of man. Needs form demand, which largely depends on the tastes and preferences of people, that is, on their subjective perception of the product or consumer preferences.

In economic theory, consumption refers to the process of using the results of production to satisfy certain needs.

Consumer behavior is methodologically based on the theory of marginal utility. The consumer buys goods and services to satisfy his needs, that is, he wants to obtain a certain utility from them. Therefore, utility is the pleasure or satisfaction that consumers receive from the goods and services they purchase.

All people are capable of comparing the satisfactions obtained from different activities and products, and preferring some types over others. These preferences are “pure” because they do not depend on income and prices. “Pure” preferences do not yet represent actual purchasing choice. Desire becomes choice and the individual becomes a buyer when his preferences lead to actual purchases in the market. However, choice, unlike desires, is limited by income and prices.

The theory of consumer behavior also assumes that consumers with choices behave rationally.

The mechanism that organizes consumer behavior is a motive, and the process of forming a motive is motivation.

First, the reasons for the motive are determined based on the socio-psychological characteristics of the consumer and the necessary requirements for the quality and quantity of the product. Next, a purchase plan is formed: choosing a goal (quantity and quality of the product), ways to achieve it (how the product presented on the market will be purchased), as well as assessing the subjective probability of achieving success and predicting the consequences.

As we know, the marginal utility per one ruble of production while maximizing the total utility from consumption is the same for all products. In this case, the price of the product reflects its marginal utility, i.e., consumer equilibrium occurs with constant purchasing power of money, which is called "consumer surplus". The meaning of this concept is as follows: the consumer pays the same price for each unit of goods, equal to the marginal utility of the last, least valuable unit for him. This means that for each unit of goods preceding the last, the consumer receives some benefit.

So, consumer surplus- this is the difference between the amount that the consumer would be willing to pay and the amount that he actually paid.

Let us explain the idea of consumer surplus graphically (Fig. 6.1 a). Let's draw a line through the points that characterizes consumer demand for some product.

Rice. 6.1. Consumer surplus.

Dot P1- the maximum price that a consumer can and is willing to pay for one unit of a product. This is the maximum price of the product.

If she were taller P1 the consumer would not buy the product at all.

The consumer is willing to pay for the second unit of goods P2(law of diminishing utility), etc. The real price of the product on the market Pn. Therefore, when purchasing the first unit of a good, the consumer receives a consumer surplus of Р1 – Рn, when buying a second unit of goods - in the amount Р2 – Рп etc.

On the graph, consumer surplus is the area bounded above by the demand curve and below by the price line. The lower the price, the greater the consumer surplus.

For example (see Fig. 6.1 b), if the consumer purchased only one unit of goods, then he would agree to pay 80 rubles. For the second unit the consumer would pay 60 rubles, the buyer values the third unit at 40 rubles, and this marginal utility will determine the market price of all three units. Therefore, the market price paid by the consumer when purchasing three goods will be: 40 + 40 + 40 = 120 rubles. If we sum up the individual estimates of the marginal utility of each of the three units, we would get: 80 + 60 + 40 = 180 rubles. Thus, when purchasing three units of goods, the consumer surplus was: 180–120 = 60 rubles.

Budget lines

We already know that the consumer, in his preferences for certain goods, encounters very significant obstacles: the price of the product and the income of the consumer himself, i.e., his budgetary capabilities. Let's look at the latter in more detail.

Consumer capabilities are characterized by lines budget constraint(budget lines). They show what combinations of two goods can be purchased at a certain price level for these goods and the amount of money income. If a buyer wants to buy a product X by price Rx and goods Y by price Рy in certain quantities, then for the purchase of these two goods he can allocate a sum of money equal to I, where / is the consumer’s income.

The budget constraint equation has the form:

Where Рх, Рy, Qx, Qy- prices and quantities of goods, respectively X And Y.

The meaning of the budget constraint is that the consumer's income is equal to the amount of expenses for the purchase of goods X And Y. Transforming the previous equality, we get:

And

If the consumer decides to spend all income only on the purchase of goods A, then he will buy this product in the amount I/Px. If the consumer decides to spend all income only on the purchase of goods IN, then he will buy this product for the amount of I/Py.

Let us draw a line through the indicated points, which will be called consumer budget line(Fig. 6.2).

Rice. 6.2. Budget line.

Any point on this line characterizes possible combinations of goods X and 7, on which the consumer can spend his money, and is available to the consumer. All sets located above and to the right of the budget line are inaccessible to the consumer (point IN), so buy a set IN does not allow the consumer's real income. Dot WITH is achievable for the consumer, but in this case the consumer will not extract maximum utility from his income, and therefore, it is less preferable. The slope of the budget line is characterized by a negative price ratio (-Px/Py), which means the quantity of good Y that must be given up in order to purchase an additional unit of goods within the cost of real income.

The stated price ratio measures the opportunity cost of consuming the good X and determines the rate of product replacement Y goods X.

The behavior of the budget line is subject to certain patterns. A change in income (while the prices of goods remain unchanged) leads to a shift in the budget constraint line parallel to itself, since the price ratio (the slope of the budget constraint line) will not change.

If consumer income decreases, the budget line shifts in parallel to the left down towards the origin of the coordinate axes (line I")(Fig. 6.3). Conversely, if a consumer's income increases, his consumption capabilities will also increase and he will be able to buy more. The budget line will shift parallel upward to the right of the origin of the coordinate axes. The distance from the budget line to the origin of the coordinate axes depends on the amount of consumer income.

Rice. 6.3. Changes in the budget line.

The slope of the line depends on the ratio of prices for goods X And Y.

First case: prices for both goods increased proportionally, that is, they increased by the same number of times, while the amount of consumer income did not change. Consumer opportunities have decreased, and the consumer's budget line has shifted parallel downward to the center of the coordinate axes (corresponds to our example with the line I").

Second case: prices for both goods have decreased proportionally, which will mean an increase in consumer opportunities (income effect), and the consumer's budget line will shift parallel upward from the origin of the coordinate axes.

If prices and consumer income simultaneously increase or fall, then the position of the consumer’s budget line will not change. Hence the conclusion: the meaning of income indexation is so that the state can ensure (at a minimum) a proportional shift in prices and incomes in order to prevent a decline in the standard of living of the population. The policy of social protection is, first of all, to ensure that price growth does not outpace income growth.

Third case: there was a change in the prices of goods relative to each other. The price of the product X remained the same, product Y– decreased (Fig. 6.3). In this case, the consumer will be able to buy more units of the product Y without prejudice to the purchase of goods X. This is where the income effect comes into play. If the price of the goods Y increased, then the consumer without prejudice to the purchase of goods X will buy fewer units of the product Y.

To answer the question of how to ensure maximum shopping satisfaction on a limited budget, we must know which product set we prefer. Our preferences are expressed through indifference curves.

Indifference curve is a line, each point of which represents a combination of two goods that have the same total utility for consumption, and therefore the consumer is indifferent which of these sets to choose (Figure 6.4).

Rice. 6.4. Indifference curves.

For example, two products X and three products Y have the same total utility as three goods X and two goods Y, etc. Refusal of one of the goods is compensated by receiving another. For these product combinations X And Y the consumer is therefore equally indifferent. However, any combination of goods noted is equally good for the consumer, since they provide the same utility.

If from the point of view of a given consumer the sets are equivalent, then the points A and B lie on the same indifference curve. An indifference curve lying above and to the right of another curve represents sets of goods that are more preferable for a given consumer. Thus, set C contains the same amount of good Y as set A, but more quantity of goods X. Indifference curves further away from the origin correspond to a higher level of need satisfaction. For example, since the curve U2 is to the right of the curve U1 then any set lying on the indifference curve U2, preferable to any set on the indifference curve U1. A set of indifference curves for an individual consumer and two different goods is called card of indifference.

Movement along the indifference curve from top to bottom means that the consumer refuses a certain amount of the good Y to receive additional quantity of goods X. The convex nature of the curve indicates that the consumer is dealing with goods that are not considered interchangeable. The amount of one good that a consumer is willing to give up in order to get an additional unit of another, while remaining at a given level of need satisfaction (on a given indifference curve), is called marginal rate of substitution (MRS). The marginal rate of substitution can be represented as the ratio:

In Fig. 6.5 shows that as consumption of good X increases for each additional unit (ΔХ)(movement from point A to the point D) quantity of goods Y, which the consumer is willing to give up ( ΔY), is reduced, i.e. the marginal rate of substitution decreases.

Rice. 6.5. Marginal rate of substitution.

Indeed, the less scarce good X becomes, the less of good Y we are willing to sacrifice in order to continue to increase its consumption. In other words, an increase in the quantity of good X leads to a decrease in its marginal utility. The slope of the indifference curve at each point is determined by the marginal rate of substitution multiplied by 1.

The nature of the indifference curve has a downward shape - a negative slope, because the ratio of Y and X has an inverse relationship (see demand curve).

Indifference curves can have different shapes. In Fig. 6.6. indifference curve U1 shows that the consumer is dealing with goods that are not absolutely interchangeable.

Rice. 6.6. Types of indifference curves.

For two perfectly interchangeable goods, the indifference curve will look like a straight line (MRS= const). Usually such goods are considered as one.

Curve U2- products cannot replace each other at all (right and left shoes). Such goods strictly complement each other (the indifference curve is mutually perpendicular segments).

Curve U3 shows that the more a consumer has of a product, the more he would like to have it. The indifference curve is concave to the origin.

If you combine a map of indifference curves and a budget constraint on one graph, it will be possible to determine which product mix the consumer will choose in order to get maximum satisfaction (Figure 6.7).

Rice. 6.7. Optimal consumption.

The consumer will not select the point A, in which the budget line intersects some indifference curve U1 and period IN, because they are located on a lower indifference curve. He will choose a point E, where the budget line is tangent to the indifference curve U2 above the curve U1.

The optimal product set for the consumer E contains QEX units of goods X And QEY- units of goods Y.

At the point E(the point of optimum, or consumer equilibrium), the slopes of the indifference curve and the budget line coincide, therefore:

Regrouping the terms of the last proportion, we get:

So, at the consumer's optimum point, the ratio of marginal utilities is equal to the ratio of the prices of consumed goods.

This condition is true for the consumer choice problem with any number of goods.

In the case of two goods, the consumer maximizes his utility if two conditions are simultaneously satisfied. The first is that M.R.S. for these goods should be equal to the ratio of their prices. The second condition is that the income allocated for the purchase of these goods is spent in full.

1. The theory of consumer behavior assumes that consumers with choices behave rationally. Buyers always choose a product based on their income, which, subject to certain restrictions on retail prices, can best satisfy their needs.

2. Utility theory assumes that the prices of goods are based on their value, defined as the subject’s judgment about the significance of the goods at his disposal. Utility maximization rule in accordance with the above, it consists in such a distribution of the consumer’s monetary income in which the last ruble spent on the purchase of each type of product would bring the same additional (marginal) utility. Now only changes in consumer preferences, product prices and income levels can bring the consumer out of equilibrium.

3. According to the law of diminishing marginal utility, the value of each subsequent good, as its supply increases, falls and reaches zero at the point of complete saturation (Gossen’s first law).

4. The consumer will receive the maximum utility from the consumption of a given set of goods provided that the marginal utilities of all consumed goods are equal (Gossen’s second law).

5. The income effect is a change in demand for a product as a result of fluctuations in the purchasing power of money income, which in turn is caused by changes in prices. The substitution effect consists of reducing (increasing) the consumption of a certain good while simultaneously increasing (reducing) the consumption of other goods if its price increases (decreases).

6. Consumer surplus is the difference between the amount that the consumer would be willing to pay and the amount that he actually paid.

7. A budget line is used to depict the set of product sets available to the consumer. Budget constraint lines show what combinations of two goods can be purchased at a certain price level for these goods and the amount of money income. The meaning of the budget constraint is that the consumer's income is equal to the amount of expenses for the purchase of goods HiU.

8. An indifference curve is a line in which each point represents a combination of two goods that have the same total utility for consumption, and therefore the consumer is indifferent which of these bundles to choose. The indifference curve is usually convex towards the origin.

The consumer's optimum is achieved at the point where the budget line touches the indifference curve. At the consumer's optimum point, the ratio of marginal utilities is equal to the ratio of the prices of consumed goods.

2. Basic models of consumer behavior in the economy

2.1 Model of economic man

2.2 Typologies of rationality and following one’s interests

2.3 Behavioral premises adopted in modern institutionalism

Conclusion

Bibliography

Introduction

In recent years, our country has increasingly used sample statistical methods to improve the methodology of socio-economic and marketing surveys.

The purpose of the course work is to study consumer behavior patterns

The purpose of the work determined the nature of the tasks posed and solved by the author:

consider consumer behavior as an object of economic theory;

study the basic models of consumer behavior in the economy.

The theoretical and methodological basis of the course work was the works of domestic and foreign scientists in the field of economics and statistics.

The structure of the course work consists of an introduction, two main chapters, a conclusion and a list of references.

1. Consumer behavior as an object of economic theory

1.1 Theory of consumer behavior

1.2 Phases of consumer behavior

According to this working definition, consumer behavior consists of several phases:

the “pre-action” phase - the formation of sentiments and assessments that precede specific consumer decisions and actions;

the phase of consumer action to acquire goods - purchasing market goods or acquiring them in some other way;

the phase of obtaining consumer satisfaction (effect), including the process of production of basic consumer goods (preparing market goods for consumption and their consumption).

Thus, consumer behavior as an object of economic theory is a complex economic category, essentially reflecting a whole set of economic relations, processes and phenomena.

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Coholding

1. Postulates of the theory of consumer behavior

2. Law of demand and theory of consumer behavior

2.1 Income effect and substitution effect

2.2 Concept of utility

3. Cardinalist theory of consumer behavior

4. Ordinalist theory of consumer command

4.1 Indifference curves and their properties

4.2 Budget line and its properties

4.3 Graphical interpretation of consumer equilibrium

1. Postulates of the theory of consumer behavior

consumer behavior cardinalist demand

The formation of market demand for any good is based on the decisions of its individual consumers, i.e. individual demand. Ultimately, in a market economy, production activities are limited and determined by consumer behavior. This chapter will examine a model that describes the behavior of individual consumers - the theory of consumer behavior. This theory answers the question of how many units of each product a consumer will purchase under certain conditions and how his preferences change when these conditions change.

The theory of consumer behavior takes into account a number of restrictions that prevent people from purchasing everything they want. One of these restrictions is budgetary restraint. The cash income of all consumers is limited to a greater or lesser extent. Since the consumer has a limited budget, he can purchase a limited amount of goods. The next limitation is the prices of goods. All goods presented on the market have a given price, determined by the value of the production costs of these goods. Production costs arise because the production of goods requires the expenditure of rare, expensive resources.

The mechanism of consumer behavior and the theory of consumer behavior is based on a number of provisions (postulates):

Sh Plurality. The needs of man and human society are great and varied, and they entail a variety of benefits that contribute to the satisfaction of these needs. Every consumer wants to consume a wide variety of goods. The theory of consumer choice assumes that the consumer has plenty to choose from, that is, at any given moment in time there are several possible options for satisfying a given need.

Sh Sovereignty. Each consumer makes an individual decision to purchase a particular good and cannot have a decisive influence on their producers. However, the market mechanism summarizes these individual decisions of many consumers and conveys this aggregate decision to the producer. If the choice of consumers is made in favor of a certain good and consumers purchased it by paying a certain price, then the producer of this good receives a profit and the right to further development of production. Consumer sovereignty presupposes his ability to influence the producer. In other words, consumer sovereignty is the power of the consumer over the market, his ability to determine what goods and in what quantities should be produced.

Sh Rationality . Another important factor determining consumer choice is his system of preferences. The same goods will bring different benefits to different people. Each consumer gravitates towards a certain set of life benefits. There is no objective scale that allows us to determine the usefulness of a particular good, but each consumer has his own subjective scale of preferences. A person’s behavior is rational if he knows what set of goods he needs, can compare different sets of goods and choose the most preferable one for himself.

2. Law of demand and theory of consumer behavior

Let us recall that the law of demand states that, with all other parameters remaining constant, a decrease in the price of a good leads to an increase in the quantity demanded for it. Conversely, other things being equal, an increase in price leads to a decrease in the quantity demanded. One explanation of the law of demand is based on the common sense of the consumer. When making a purchase, the price of the good turns out to be a kind of obstacle that complicates the implementation of the transaction. Moreover, the higher this price, the more serious the obstacle and the less likely it is to acquire the good. And vice versa. The downward sloping shape of the demand curve can also be explained using income and substitution effects or the concept of utility.

2.1 Income effect and substitution effect

The consumer most often uses goods not individually, but in certain sets. Set of benefits- a set of certain quantities of various goods consumed together in a certain period of time. A change in the price of one good, with the prices of other goods remaining constant, represents a relative change in the price of that good. In other words, this good becomes cheaper (or more expensive) in relation to other goods. In addition, a change in the price of a good leads to a change in the real income of the consumer. Before the price reduction of a given good, the consumer could purchase a smaller quantity of it, and after the price reduction, a larger quantity. He can also use the saved money to purchase other goods. A change in the price of a certain good affects the structure of consumer demand in two directions. The volume of demand for a given good changes under the influence of changes in its relative price, as well as under the influence of changes in the real income of the consumer.

Any change in price results in income and substitution effects because it changes the amount of goods available and their relative prices. These effects are the consumer's reaction to changes in relative prices and real income. Substitution effect-- a change in the structure of consumer demand as a result of a change in the price of one of the goods included in the consumer set. The essence of this effect comes down to the fact that when the price of one good rises, the consumer reorients himself to another good with similar consumer properties, but with a constant price. In other words, consumers tend to substitute cheaper goods for more expensive ones. As a result, the demand for the original good falls. For example, coffee and tea are substitute goods. When the price of coffee increases, tea becomes relatively cheaper for consumers and they will substitute it for relatively more expensive coffee. This will lead to increased demand for tea. Income effect-- the impact exerted on the structure of consumer demand due to a change in his real income caused by a change in the price of a good. The essence of this effect is that when the price of a good decreases, a person can buy more of this good without denying himself the acquisition of other goods. The income effect reflects the effect on the quantity demanded of changes in the buyer's real income. A fall in the price of one product has, albeit insignificantly, an impact on the general price level and makes the consumer relatively richer; his real income, albeit insignificantly, grows. He can use his additional income received as a result of a reduction in the price of a given good both to purchase additional units of it and to increase the consumption of other goods.

For normal goods, the income effect and the substitution effect are summed up, since a decrease in the price of these goods leads to an increase in demand for them. For example, a consumer, having a given income that does not change, purchases tea and coffee in a certain ratio, which are normal goods. In this case, the substitution effect works as follows. A fall in the price of tea will lead to an increase in demand for it. Since the price of coffee has not changed, coffee now becomes relatively (comparatively) more expensive than tea. A rational consumer replaces relatively expensive coffee with relatively cheap tea, increasing demand for it. The income effect is manifested in the fact that a decrease in the price of tea made the consumer somewhat richer, that is, it led to an increase in his real income. Because the higher the income level of the population, the higher the demand for normal goods, and the increase in income can be directed towards purchasing additional amounts of tea and coffee. Consequently, in the same situation (a fall in the price of tea while the price of coffee remains unchanged), the substitution effect and the income effect lead to an increase in the demand for tea. The income effect and the substitution effect act in the same direction. For normal goods, the effects of income and substitution explain the increase in demand when prices fall and the decrease in demand when prices rise. In other words, the law of demand is fulfilled.

For lower category goods, the effects of income and substitution are determined by their difference. For example, a consumer, having a given income, purchases natural coffee and a coffee drink, which is a lower category product, in a certain ratio. In this case, the substitution effect works as follows. A fall in the price of a coffee drink will lead to an increase in demand for it, since the drink is now a relatively cheap good. Since the price of coffee has not changed, coffee is a relatively (relatively) expensive good. A rational consumer replaces relatively expensive coffee with a relatively cheap coffee drink, increasing the demand for it. The income effect is manifested in the fact that a decrease in the price of a coffee drink made the consumer somewhat richer, that is, it led to an increase in his real income. Since the higher the level of income of the population, the lower the volume of demand for inferior goods, the increase in real income of the consumer will be directed to the purchase of additional quantities of coffee. As a result, a decrease in the price of a coffee drink (lower category product) will lead to a fall in demand for it and an increase in demand for coffee (higher category product). Consequently, in the same situation (a fall in the price of a coffee drink while the price of coffee remains unchanged), the substitution effect leads to an increase in the demand for a coffee drink, and the income effect leads to a fall in demand for it. The income effect and the substitution effect operate in different directions.

For inferior goods, the net effect of both effects depends on the degree to which each influences consumer choice. If the substitution effect is stronger than the income effect, then the demand curve for an inferior good will have the same shape as a normal good. Thus, the law of demand is fulfilled. If the income effect is stronger than the substitution effect, then the volume of demand for a lower-category good falls as the price of this good decreases. In other words, the law of demand does not apply here. Goods for which the law of demand does not hold are called Giffen goods, named after the English economist of the 19th century who theoretically substantiated this phenomenon. The Giffen demand curve for goods is shown in the figure.

Giffen product- a product for which the demand, other things being equal, changes in the same direction as its price, since the income effect is stronger than the substitution effect.

2.2 Utility concept

Let us remember that a need is a need for something necessary or a lack of something necessary to maintain a person’s life, the development of his personality and society as a whole. A need is characterized as a state of dissatisfaction that can be overcome by using certain goods (goods and services). By purchasing such goods and services, the consumer can achieve satisfaction of this need, receive benefit or usefulness from their use.

Utility-- satisfaction or fulfillment of requests that people receive from the consumption and use of goods. Utility is an abstract category used in economics to determine the pleasure that people receive from consuming goods. The utility of a particular good is the main factor in consumer choice. Utility is a purely individual and subjective concept. Each person understands usefulness in his own way. Some products may be useful to one person but useless or even harmful to another. For example, glasses are useful for a nearsighted person, but useless for someone who has 100% vision.

Utility function-- the relationship between the volume of goods consumed and the level of utility achieved by the consumer. Mathematically, the utility function looks like this:

where f is a function symbol; U -- utility level; QX, QY -- the number of goods X and Y consumed over a certain period. You can include any number of variables in this function. This function demonstrates that the utility received by a person depends only on the amount of goods consumed. There is a distinction between marginal and total utility of a good.

Marginal utility-- additional utility received by the consumer from consuming an additional unit of good. Each subsequent unit of good used by the consumer contributes to the satisfaction of this need. Since as additional units of the good are consumed, the buyer's needs will be gradually satisfied, the marginal utility of each subsequent unit of the good will decrease. Law of Diminishing Marginal Utility states that as additional units of a good are consumed, the marginal utility of each subsequent unit will be less than the previous one (Figure a). The law of diminishing marginal utility is also called Gossen's first law. Overall usefulness- the satisfaction received by the consumer from consuming a given amount of goods over a certain period of time.

Total utility generally increases as more and more goods are consumed, but usually at a decreasing rate. If further consumption of a good is harmful (marginal utility is negative), then total utility decreases (Figure b).

Total utility is determined by summing up marginal utility indicators and is calculated as follows:

where TU is total utility; MU is marginal utility.

Marginal utility is defined as the ratio of the change in the value of total utility to the change in the amount of consumed good:

where TU1 and TU2 are the original and new values of total utility; Q1 and Q2 are the original and new quantities of the good.

The law of diminishing marginal utility underlies the definition of demand and explains why the demand curve is downward sloping. The larger the supply of a good a consumer has, the less value each additional unit of it has for him. If each subsequent unit of a good has less and less marginal utility, then the consumer will buy additional units of the good only if their price falls.

There are two schools of thought in utility theory: cardinalist and ordinalist. Historically and methodologically, the cardinalist theory of consumer behavior preceded the ordinalist theory.

3. Cardinalist theory of consumer behavior

The cardinalist, or quantitative, theory of consumer behavior in solving a given problem assumes the possibility of theoretical measurability of the utility of a good. In other words, it is assumed that it is possible to determine the exact amount of utility obtained from consuming a good. The quantitative measurability of utility makes it possible both to compare different goods according to their utility, and to determine the difference between them. Proponents of the theory (K. Menger, L. Walras) believed that utility is measured in conventional units - utils (from the English utility - usefulness).

The quantitative measurability of utility allows the consumer to measure the utility of any additional unit of good (marginal utility) and estimate the value of the total utility of a given set of goods. In the cardinalist theory of consumer behavior, utility is a subjective value, since it reflects the subjective attitude of a particular person to a particular good.

The fundamental position of this theory is the postulate of decreasing marginal utility of goods. Based on this postulate, we can formulate a consumer equilibrium rule. Consumer equilibrium-- a situation where a consumer, limited by a given budget, cannot increase total utility by spending less on purchasing one good and more on purchasing another. As already noted, each consumer uses many different goods and for each of them the law of diminishing marginal utility applies. A rational consumer will purchase first those goods that bring the greatest utility. The consumer will increase the consumption of each good until the marginal utilities of these goods are equal. Indeed, if the marginal utility of a good is higher than the marginal utility of other goods, then the consumer will prefer to purchase it. At one time, this rule of consumer behavior was formulated by G. Gossen and was called Gossen's second law. Now the law can be formulated as follows: in order to obtain maximum utility, a consumer with limited resources must consume as much of each good as is necessary to equalize the marginal utilities for each good. Mathematically, the rule of consumer equilibrium is expressed by the equality MU1 = MU2 = ... = MUn.

In this rule, the limited resources of the consumer primarily mean his limited income. In other words, the consumer must manage his income in such a way that the set of goods he acquires brings maximum utility. In a situation of consumer equilibrium, the utilities of monetary units spent on the acquisition of various goods must be equal. Utility maximization rule, based on all that has been said, is that the consumer’s monetary income should be distributed in such a way that the last monetary unit spent on the acquisition of each type of good would bring the same marginal utility. Mathematically it looks like this:

where P is the price of the good.

In other words, the consumer will demand a given good until the marginal utility of this good per monetary unit becomes equal to the marginal utility per monetary unit spent on purchasing another good. Using this rule, the consumer, without going beyond his budget, purchases a set of goods and services that brings him the greatest amount of utility.

If equality is not satisfied, then there will be some redistribution of consumer spending between goods in favor of a good with a higher level of marginal utility per monetary unit, which will lead to an increase in total utility for the consumer. Indeed, if the price of the second good has decreased, then the equilibrium is disturbed:

MU1/P1< MU2/P2 т. е. последняя денежная единица, затраченная на второе благо, стала приносить большую полезность, чем последняя денежная единица, затраченная на первое благо. Для восстановления равновесия, исходя из закона убывающей предельной полезности, существуют два пути. В первом случае необходимо увеличить предельную полезность первого блага, для чего следует сократить потребление этого относительно дорогого товара. Во втором случае следует уменьшить предельную полезность второго блага, увеличив потребление этого относительно дешевого блага. Поступая таким образом, покупатель будет действовать в точном соответствии с законом спроса и вновь достигнет состояния потребительского равновесия и сможет максимизировать получаемую полезность.

4. Ordinalist theory of consumer behavior

The ordinalistic, or ordinal, theory of consumer behavior proceeds from the fact that the consumer cannot numerically measure the amount of utility received from consuming a good, but can compare and rank sets of goods from the position of their preference. Accepting this thesis, it is necessary to accept a number of provisions characterizing the relationship of consumer preference and indifference. The modern economic model of consumer choice is based on several postulates.

Sh Unsaturation . The need for goods cannot be satisfied. People always prefer more of a given good to less. The set that includes a larger number of goods will receive a higher assessment of the consumer and his preferences. Some products that people least prefer or even avoid - anti-goods (pollution, noise, cigarette smoke, etc.) do not fit this provision. Consumption of anti-goods reduces an individual's well-being.

Sh Comparability of preferences . When deciding to purchase a good or refusing to purchase it, the consumer in both cases must first form his attitude towards the good in question. The theory of consumer behavior assumes that the consumer can rank alternative goods and can indicate which of the compared goods is better, or note their equivalence. In other words, the consumer can indicate that good X is better than good Y, or good Y is better than X, or both goods are of equal value.

Sh Transitivity of preferences . When making a purchase decision, the consumer must consistently transfer his preferences from one good to another. If a person prefers good X to good Y, and the latter to good Z, then he must prefer good X to good Z. Indeed, if good X brings greater satisfaction to the consumer than good Y, and good Y brings more satisfaction than good Z, then good X brings more utility than good Z If an individual believes that the utility of a good is equal to the utility of good Y, and the utility of Y is equal to the utility of good Z, then he should not see the difference between the consumption of X and Z.

Each consumer wants to purchase various goods, and in the actual consumed sets the number of types of goods is quite large. However, to study the patterns of consumption processes, we can limit ourselves to just two goods.

Let's consider a graphical interpretation of the ordinal theory of consumer behavior, which is based on the construction of indifference curves that characterize the system of consumer preferences.

4.1 Indifference curves and their properties

Let us assume that the consumer has a set of goods consisting of X and Y. All ratios of the quantities of these goods are equivalent for him; the consumer does not care which set to choose. Therefore, these goods belong to the indifference set. Set of indifference-- a set of consumer choices, each of which has equal utility and therefore has no preference over others.

An indifference curve is a graphical representation of a set of indifferences. Indifference curve-- a set of sets of goods that provide the consumer with an equal amount of satisfaction of needs, i.e., bringing him the same utility. By taking other possible combinations of goods corresponding to different values of total utility, we can construct an indifference map.

Indifference Map-- a set of indifference curves corresponding to different levels of utility for one consumer and one pair of goods. Consumer tastes and preferences are represented by a map of indifference curves. Each subsequent indifference curve, passing further from the origin, implies a relatively larger value of utility.

Any indifference curve represents the same total utility of various goods for the consumer. The indifference curve (U) consists of points symbolizing sets of goods X and Y. The total utilities of all sets represented by the points on this curve are the same, that is, the consumer does not care what combination of goods X and Y he will purchase. Moving from point A to point B, the consumer reduces the consumption of good Y by DY and increases the consumption of good X by H, but the overall level of consumer satisfaction (total utility) remains unchanged (figure below).

Replacement zone(substitution) - a section of the indifference curve in which effective replacement of one good with another is possible.

Mutual replacement of goods X and Y is possible only within the segment AB (replacement zone). The quantity of good X1 represents the minimum required amount of consumption of good X, which the consumer cannot refuse, no matter how much good Y is offered in return. Similarly, Y1 is the minimum required amount of consumption of good Y. The marginal rate of substitution is the norm according to which one good can be replaced by another good without gain or loss of utility for the consumer. The marginal rate of substitution is the amount of one good that a consumer is willing to give up in order to obtain an additional unit of another good. The marginal rate of substitution is calculated as follows:

where MRS is the marginal rate of substitution; Qx -- quantity of product X; QY -- quantity of product Y.

The marginal rate of substitution is always negative, since an increase in the consumption of one good occurs at the expense of a reduction in the consumption of another. The marginal rate of substitution decreases as one moves along the indifference curve—having at its disposal an ever-increasing amount of a given good and increasing its consumption, the buyer, in exchange, is willing to give up an ever-smaller amount of another good, which becomes increasingly scarce. For a consumer who wants to remain on the same indifference curve, the increase in utility from increasing the consumption of good X must be equal to the loss of utility from reducing the consumption of good Y. Thus, the marginal rate of substitution of good X with good Y can be considered as the ratio of the marginal utility of good X to the marginal utility benefits Y:

Let's consider some properties of indifference curves:

* indifference curves have a negative slope. There is an inverse relationship between the quantities of goods X and Y. When the consumption of one good decreases, in order to compensate for losses and maintain the same level of utility, the consumer must increase the consumption of another good. Any curve expressing the feedback of variables has a negative slope;

* indifference curves are convex with respect to the origin. It was noted above that when the consumption of one good increases, the consumer must reduce the consumption of another good. The convexity of the indifference curve relative to the origin is a consequence of the fall in the marginal rate of substitution. A gentle descent of the indifference curve downwards or an upward rise indicates a decrease in the rate of substitution of one good for another as the share of this good in the consumer basket decreases;

* the absolute value of the slope of the indifference curve is equal to the marginal rate of substitution. The slope of the indifference curve at a given point shows the rate at which one good can be replaced by another good without gain or loss of utility for the consumer. This ratio is characterized by the marginal rate of substitution;

* indifference curves do not intersect. The same consumer cannot characterize the same set of goods with different levels of utility. Therefore, two indifference curves representing different levels of utility cannot intersect;

* it is possible to construct an indifference curve passing through any set of goods. An indifference curve can be constructed for any pair of goods that bring a certain level of utility. It is on this principle that an indifference map is constructed, which provides complete information about the consumer’s system of preferences.

4.2 Budget line and its properties

While indifference curves describe the consumer's system of preferences, the budget line characterizes the set of options available to the consumer.

The budget constraint shows which consumption bundles are available to the consumer at given prices and income. The budget constraint is usually described by the equation

where Рх and РY are the price of goods X and Y; Qx and QY-- quantities of goods X and Y; M is the consumer's disposable income. This condition means that the sum of costs for all goods does not exceed the consumer's income.

The budget space represents the entire range of choices available to the consumer. In the figure, this is a shaded triangle bounded by the budget line and coordinate axes. In the simplest case, the budget constraint line is described by the equation.

The budget line intersects the coordinate axes at points X1 = M/Px and Y1 = M/Py, showing the maximum possible quantities of goods X and Y that a consumer can purchase for a given income at given prices.

Let's look at some properties of the budget line:

Ш The budget line has a negative slope. Since the bundles of goods located on the budget line have equal values, an increase in purchases of one good is possible only if the purchases of another good are reduced. Any curve expressing the feedback of variables has a negative slope (see figure).

A budget line shows the different combinations of two products that can be purchased given fixed money income and prices.

Ш The location of the budget line depends on the amount of money income. An increase in the consumer's monetary income at constant prices leads to a parallel movement of the budget line to the right (Figure a). A decrease in the consumer's monetary income at constant prices leads to a parallel movement of the budget line to the left (Figure b). A change in consumer income does not change the slope of the budget line, but changes the coordinates of the points of intersection of the budget line with the coordinate axes.

Ш The slope coefficient of the budget line is equal to the ratio of prices of goods taken with the opposite sign. The slope coefficient of the budget line is the ratio of the price of a good measured horizontally to the price of a good measured vertically, i.e. the slope is equal to (- Px/Py)

The "-" sign indicates a negative slope of the budget line, since the prices of goods X and Y are positive values. In other words, the consumer must refrain from purchasing a certain amount of good X in order to have units of good Y to purchase.

Ш A change in product prices leads to a change in the slope of the budget line. A change in the price of one good leads to a change in the angle of inclination of the budget line and a change in one of the points of intersection of the budget line with the coordinate axes. A change in the price of good X and the effect of this change on the position of the budget line is shown in the figure. A change in the price of good Y and the impact of this change on the position of the budget line is shown in the figure. A change in the prices of both products is equivalent to a change in the consumer's real income and will move the budget line to the right or left.

4.3 Graphical interpretation of consumer equilibrium

The budget line carries objective information about the amount of consumer income and prices for goods. It shows all combinations of goods X and Y available to the consumer. Indifference curves carry subjective information about consumer preferences and are constructed on the basis of sets of indifferences. By combining the budget line and the indifference map, we can find the consumer's optimum.

The consumer's optimum point cannot lie below the budget line, since this would mean that part of the consumer's income remains unspent. This contradicts the assumptions of the ordinalist theory of consumer behavior, in particular the first postulate of insatiability, which states that people always prefer more of a given good to less. Consequently, point E lying on the indifference curve U1 cannot be the consumer’s optimum point (see figure).

Consider the options indicated by points A, B and C lying on the budget line. By purchasing sets that correspond to these points, the consumer spends his entire budget. However, points A and C lying on the indifference curve U2 are not points of optimal consumer choice, since by moving along the budget line down from point A and up from point C, you can move to the indifference curve U3, which provides a higher level of utility. Points A and C show the combinations of goods X and Y available to a given consumer, corresponding to lower total utilities, as evidenced by the fact of their location on lower indifference curves. The utility-maximizing combination of goods will correspond to the point lying on the highest indifference curve available to the consumer. The consumer optimum point is point B, since it is located on the highest indifference curve available to the consumer - U3. In other words, and, the set of goods corresponding to this point brings the highest utility to the consumer,

The consumer's equilibrium position is reached at point B, where the budget line touches the indifference curve. At the consumer optimum point, the slopes of the budget line (Px/Py) and the indifference curve (MRS) coincide. The marginal rate of substitution MRS shows in what proportion the consumer wants to exchange goods X and Y. The ratio Px/Py demonstrates in what proportion the consumer can actually exchange these goods, i.e., he should refrain from purchasing a certain amount of good X in order obtain the funds necessary to purchase a unit of product Y. The interpretation of the marginal rate of substitution as the ratio of marginal utilities allows us to express the consumer equilibrium condition in the following form:

The equation shows that the consumer maximizes his utility if he buys goods X and Y in such a way that their marginal utilities per monetary unit are equal. Thus, at point B, the best, or optimal, combination of products X and Y available to the consumer is achieved.

Point D, located on the highest indifference curve U4 and corresponding to a greater amount of utility than point B, will not be an optimal point, since it is above the budget line and is inaccessible to this consumer.

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Utility theory and consumer behavior. Theory of consumer behavior. Consumer behavior as an object of economic theory

Introduction

1.2 Phases of consumer behavior

2.2 Typologies of rationality and following one’s interests

Consumer behavior

Budget lines

Introduction

1.2 Phases of consumer behavior

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