THEORY OF

CONSUMER
BEHAVIOR
APPLIED ECONOMICS
What is Consumer Behavior?
Consumer behavior is the thought processes, conditioning,
behavioral inclinations, decisions, and actions of focus groups or target
audiences that influence or compel them to make a purchase.
Complex buying behavior
Consumers who like to opt for expensive, unique, exclusive, and
infrequently purchases products or services come into the category of
consumers who comprise complex buying behavior.
Dissonance-reducing buying behavior
Such types of consumers are also highly engaged in their purchase
decisions and associated actions but they find it quite difficult in
finding out the key differences amongst top brands in that product
niche.
Habitual buying behavior
Such types of consumer behavior are associated with customers who
have very little involvement in the buying process of products or
services.
Variety-seeking behavior
Customers who possess such behavioral patterns make their purchase
decisions while seeking variety.
The Factors that Influence Consumer
Behavior
Psychological factors
The most apparent factor to influence Consumer Behavior is human
psychology. Why and how a customer buys a particular product
largely depends on the psychology of the customer.
Personal factors
Sometimes people get attracted to some recognized brands because of
their personalities. Maybe that brand is connected with some charitable
work or perhaps inclined towards an arrangement for paying attention
to each customer.
Motivational factors
Sometimes people get easily influenced by their close friends or
acquaintances and make an instant purchase decision.
What Is Consumer Theory?
Consumer theory is the study of how people decide to spend their
money based on their individual preferences and budget constraints.
Consumer theory seeks to predict their purchasing
patterns by making the following three basic assumptions
about human behavior:
Utility maximization—Individuals are said to make calculated
decisions when shopping, purchasing products that bring them the
greatest benefit, otherwise known in economic terms as a maximum
utility.
Non-satiation—People are seldom satisfied with one trip to the shops
and always want to consume more.
Decreasing marginal utility—Consumers lose satisfaction with a
product the more they consume it.
Advantages of Consumer Theory
Building a better understanding of individuals’ tastes and incomes is
important because it has a big bearing on the demand curve, which is
the relationship between the price of a good or service and the quantity
demanded for a given period of time, and on the shape of the overall
economy.
Thank you