Application Of Consumer Choice Theory And Marginal Analysis

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By applying consumer choice theory and marginal analysis to business problems all relate the income of the consumer as well the price of the product of service. When one considers the purchase for a pair of tickets to a sporting or cultural event one needs to consider family budget, timing, and availability of alternatives. Take for instance tickets to the Denver Broncos game. Substitutes do exist but not at this level of play (high school and college) and not on a Sunday. As a result, as there are alternatives available with the price elasticity of demand measures the responsiveness of quantity demanded to changes in price; it is calculated by dividing the percentage change in quantity demanded by the percentage change in price. (Rittenberg, L. &Tregarthen, T. , 2012). Pricing and consumer behavior rely on the performance of a football team and its overall record. As the team continues to win, demand increases. The opposite happens when the team registers a lower performing season where you would see a decline in …show more content…

To the consumer purchasing a can of common table salt, it is small expense with limited consumption. The demand will not increase much with increase in income. If price of salt decreased the quantity demanded would not drastically increase as a person can only consume only so much salt. This suggests inelastic demand. Applying consumer choice theory and marginal analysis to a college class – a number of alternatives are available to the student. These are based on degree programs, location, size and cost. Pricing of this final product (college education) is inelastic in nature due to the high cost to consumer. Low-income consumers are limited to selection and alternatives. Again, this suggests inelastic demand. (Gobry, P. E.

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