Consumer Behavior

Theory
Team Teaching Economics
The Theory of Consumer
Choice
The Theory of Consumer Choice
• The theory of consumer choice examines the trade-offs that people
face as consumers.
• When a consumer buys more of one good, she can afford less of other goods.
• When she spends more time enjoying leisure and less time working, she earns less and
therefore consumes less.
• When she spends more of her income in the present and saves less of it, she reduces the
amount she will be able to consume in the future.
• The theory of consumer choice examines
• how consumers facing these trade-offs make decisions, and
• how they respond to changes in their environment.
Fakultas Ekonomi dan Bisnis
School Economics and Business

4 Creating the great business leaders

Fakultas Ekonomi dan Bisnis
School Economics and Business Shifts in the Budget Constraint

5 Creating the great business leaders

 Fakultas Ekonomi dan Bisnis
School Economics and Business Representing Preferences with Indifference Curves

INDIFFERENCE CURVE:
a curve that shows consumption bundles that give the consumer the same level of satisfaction
MARGINAL RATE OF SUBSTITUTION:
the rate at which a consumer is willing to trade one good for another

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 Four Properties of Indifference Curves
• Property 1: Higher indifference curves are preferred to lower ones.
• People usually prefer to consume more rather than less.
• This preference for greater quantities is reflected in the indifference curves.

• Property 2: Indifference curves slope downward.

• The slope of an indifference curve reflects the rate at which a consumer is willing to substitute one good for the other.
• Property 3: Indifference curves do not cross.
• To see why this is true, suppose that two indifference curves did cross, as in Figure 4.
• Then, because point A is on the same indifference curve as point B, the two points would make the consumer equally happy

• Property 4: Indifference curves are bowed inward.

• The slope of an indifference curve is the marginal rate of substitution—the rate at which the consumer is willing to trade off
one good for the other.
• The marginal rate of substitution (MRS) usually depends on the amount of each good the consumer is currently consuming.
Indifference curve model assumptions
 Indifferent curve characteristics
X

• The more to the top right (away from

B
50
Preferred the origin point), the higher the level
40 D of satisfaction
F

A
• Indifference curves do not intersect
30
each other.
20
Not Preferred C
IC
• Negative slope.
E
• Convex to the origin
0 20 30 40 50
Y

Gambar: Kurva Indifferent

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School Economics and Business The Consumer’s Optimal Choices

11 Creating the great business leaders

Fakultas Ekonomi dan Bisnis
School Economics and Business How Changes in Income Affect the Consumer’s Choices

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Fakultas Ekonomi dan Bisnis
School Economics and Business

13 Creating the great business leaders

Fakultas Ekonomi dan Bisnis
School Economics and Business

14 Creating the great business leaders

Fakultas Ekonomi dan Bisnis
School Economics and Business

15 Creating the great business leaders

Fakultas Ekonomi dan Bisnis
School Economics and Business

16 Creating the great business leaders

• Consumer Behavior Theory, states that every consumer will try to obtain maximum
satisfaction.
• They will try to make a purchase of a product if they get satisfaction from the
product they consume, where this satisfaction is comparable to or greater than the
marginal utility derived from the same expenditure for several other products.

Perilaku Konsumen
 Peran Pengambil Keputusan Pembelian

INITIATOR INFLUENCER DECIDER BUYER USER

INDIVIDU YANG MEMPUNYAI INDIVIDU YANG BERPENGARUH YANG MEMUTUSKAN APAKAH INDIVIDU YANG MELAKUKAN INDIVIDU YANG
INISIATIF PEMBELIAN BARANG TERHADAP KEPUTUSAN AKAN MEMBELI ATAU TIDAK TRANSAKSI PEMBELIAN MEMPERGUNAKAN PRODUK
TERTENTU PEMBELIAN. SESUNGGUHNYA. ATAU JASA YANG DIBELI.
Basic Concept : Utility
• Utility is the satisfaction obtained in
consuming goods and services. The
higher the level of satisfaction, the higher
the value or utility
• Total utility is the total satisfaction in
consuming a number of goods and
services.
• Marginal utility is the additional
satisfaction obtained by adding one unit
of goods/services consumed
2 Approaches:
1. Cardinal Approach (Marginal Utility)
• That is, consumer enjoyment can be expressed quantitatively
2. Ordinal Approach (Indifference Curve Analysis)
• That is, consumer enjoyment cannot be expressed qualitatively
Cardinal Approach
Marginal Utility
1. Marginal utility
• Gossen's Law I (Law of Diminishing Marginal Utility), namely that
the more units of goods consumed by consumers, the additional
satisfaction (marginal utility) obtained from each additional unit
consumed will decrease or even zero/negative.
Diminishing Marginal Utility
Total Utility and Marginal Utility of
Trips to the Club Per Week
TRIPS TO TOTAL MARGINAL
CLUB UTILITY UTILITY
1 12 12
2 22 10
3 28 6
4 32 4
5 34 2
6 34 0

• Total utility increases at a decreasing rate,

while marginal utility decreases.
a*Pa + b* Pb + ------ + z*Pz = I
Where : I = Consumer Income
Pa, Pb, Pc,----Pz = Price of product a,b,c, ---, z.
Ordinal Approach
Indifference Curve
2. Indifference Curve
 in t h e s e co n d way, w h i c h i s t h e b a s i s fo r
d e t e r m i n i n g t h e l eve l o f s ati sfa c ti o n u s i n g t h e
o rd i n a l m e t h o d ; t h e l e ve l o f s ati sfa c ti o n i s
m e a s u re d t h ro u g h o rd e rs o r ra n k i n g s b u t t h e u s e
va l u e i s n o t state d w i t h c e r ta i nt y.

 co n s i st o f c o n s i ste n c y a n d t ra n s i v i t y o f c h o i c e ,
m e a n i n g t h at i f , a > b , b > c , t h e n i te m a i s
p refe r re d to b a n d i te m b i s p refe r re d to c . T h e
co n c l u s i o n i s t h at a > b > c m e a n s a > c .
1. This approach states that the level of consumer satisfaction in
consuming an item cannot be measured by one unit but can only be
compared (cannot be quantified).
2. In the ordinal approach, how to compare customer satisfaction
using the concept of the Indifference Curve Approach / IC (Vilfredo
Pareto: 1848 -1923)
 Surplus Konsumen
Nilai kerelaan pembeli untuk
membayar suatu barang
Surplus dikurangi nilai yang sebenarnya
dibayarkan oleh pembeli
Harga Pembeli Jumlah
yang
Konsumen tersebut.
> $100 Tidak Ada
diminta
0
-Mankiw -
$80 - $100 John 1
$70 - $80 John, Paul 2
Pembeli Kerelaan $50 - $70 John, Paul, 3
untuk George
membayar <= $50 John, Paul, 4
John $100 George, Ringo
Paul $80
George $70
Ringo $50
 Suplus Konsumen
Awal

Suplus Konsumen
Surplus Untuk Konsumen Baru
Konsumen
Tambahan
Surplus Konsumen
Untuk Konsumen Awal