MACASADIA, KIER M.

BSBA – 2B
Answer the following: Turn in Your answer before 1Pm.This will be your activity/task for the week.
1. Discuss the importance of studying consumer behavior to the following;
a. Business Firms - Consumer behavior is important to any business firm that wishes to sell goods
or services to consumers. The study of consumer behavior tells firms many things that they need to
know.  It tells them what kinds of things consumers want to buy. It tells them why consumers want to
buy certain things. It tells them when consumers are likely to buy and how often they will do so. This
is vital information for a business since the whole purpose of the business is to get consumers to buy
products. The more that you know about how consumers behave and why they behave that way, the
more likely you are to be able to get them to buy from you.
b. Marketers - Study of consumer buying behavior is most important for marketers as they can
understand the expectation of the consumers. It helps to understand what makes a consumer to buy
a product. It is important to assess the kind of products liked by consumers so that they can release
it to the market. Marketers can understand the likes and dislikes of consumers and design base their
marketing efforts based on the findings.
c. Suppliers – It helps suppliers to understand how the decision to buy was made and how they
hunted for the product. These information help suppliers to know the reasons behind the purchase or
rejection of a product or service by the customer.
d. Economist - The consumer and his behavior have concerned all economists, no matter if they
are theoreticians or practitioners. If we take as a starting point the observation that man lies at the
heart of economy, we understand that the attempts to explain his role and the manner in which he
behaves in economic life are more and more numerous and involve the use of concepts from
different domains of study: psychology, sociology, etc.
e. Other Buyers – It helps in understanding how individuals make decisions to spend their available
resources like time, money, and effort while purchasing goods and services. It is a subject that
explains the basic questions that a normal consumer faces − what to buy, why to buy, when to buy,
where to buy from, how often to buy, and how they use it.

2. Briefly explain the different theories under consumer behavior, based on your own words.
Provide accurate example/s for better reasoning.
The Marshallian approach takes into account the users’ utility. When you are
purchasing a basket of goods, you will go on buying them till your utility is maximized, i.e. the price
equals marginal utility. You see where your budget-line coincides with your so-utility indifference
curve. You maximize your utility, subject to a budget constraint. To create brand image, marketers
used psychoanalytic theory. If a brand can appeal to a deep wish, fantasy, aggression or some
escape from life, then consumers may equate a brand or specific line of products with a desire. A
simple application of Pavlovian theory is the response that some consumers have when they hear
the word “sale.” It can generate an urge to shop, even if people have no specific need at the time.
Coca-Cola is a classic example of a brand that has used this technique successfully for years. Coca-
Cola’s marketing campaigns associate various activities and environmental factors, like sports,
dehydration and heat, with their product. These activities and factors make people thirsty. The
Veblenian socio-psychological model states that consumers’ social and cultural backgrounds are
important determinants of their buying behavior. For instance, for a long time, Prada, the luxury
fashion brand refused to sell its products online. It insisted that since it was an elite brand, selling
online would diminish its social class.
3. Research and explain the following terms:
- Utility
Utility is defined as want-satisfying capacity of the commodity. For example, when a person is
hungry, bread has utility for him. It is a relative concept. eg. plough is useful for a farmer but has no utility for
a fisherman.
- Marginal Utility
The extra utility a consumer obtains from the consumption of one additional unit of a good or
service. Marginal utility always declines for each successive quantity of consumption. If you like ice
cream, and you eat one scoop, the first scoop will provide the greatest satisfaction. If you eat
another scoop, you'll probably enjoy that also, but the satisfaction will be less than for the first. At
some point, you will not want any more ice cream. The marginal utility will drop to zero and may
even become negative. 
- Law of Diminishing Marginal Utility
The law of diminishing marginal utility explains that as a person consumes an item or a
product, the satisfaction or utility that they derive from the product wanes as they consume more and
more of that product. For example, an individual might buy a certain type of chocolate for a while.
Soon, they may buy less and choose another type of chocolate or buy cookies instead because the
satisfaction they were initially getting from the chocolate is diminishing.
- Total Utility
The total amount of satisfaction derived from the consumption of a single product or a
combination of products. A person or firm has limited resources, so total utility is maximized by
apportioning those resources to products and services where the marginal utility of each is equal. In
terms of money, if buying a greater quantity of 1 item yields a smaller marginal utility than if the
money were spent to acquire another item, then total utility will be less than if that other item was
purchased. Thus, total utility is maximized when the marginal utility of the last dollar spent on any
product or service equals or exceeds the marginal utility of any other purchase that could have been
made.