The rational consumer behavior model outlines the ways that consumers weigh their consumption choices to maximize utility given the constraints they face. When comparing the prices of multiple goods and the person’s income, there is a bundle where a person’s happiness (utility) can be maximized. Maximizing utility, however, is not always easy. Consumers can be bound by many extraneous factors, or even be complicit in their loss of utility. While the rational consumer behavior model provides a solid framework of buying habits, it does not always reflect reality. The rational consumer behavior model is founded on four assumptions: diminishing marginal utility, non-satiation, free disposal, and whole-income usage. Diminishing marginal utility suggests that added happiness, given by each additional unit, decreases. Added utility can never reach zero based on the assumption that our desires for a good are non-satiable, or that more is better. Free disposal states that no amount of a good can be considered too much logistically. Lastly, it is assumed that …show more content…
Throughout the course of an average day, I drink six cans of sparkling water. My choice in brand is dominated by my ability to buy more of a cheaper brand, thus maximizing utility. There are three grocery stores within walking distance of campus, GoGrocer, CVS Pharmacy, and Aldi. GoGrocer stocks 12-packs of LaCroix sparkling water for $4.99. CVS stocks a generic brand (Gold Emblem) at $0.99 per liter. Aldi sells PurAqua sparkling water for $2.99 for 12 cans. Given that one can has 12 ounces of sparkling water and that a liter has 33.814 ounces, the per ounce cost of each brand would be $0.0347 for LaCroix at GoGrocer, $0.0293 at CVS, and $0.0208 at Aldi. This shows that the most economically efficient sparkling water brand to buy is PurAqua. Therefore, I buy the Aldi brand of sparkling water to maximize my
Have you ever thought about why you made a purchase? Or better yet, what decisions or attributes pointed you towards that specific purchase? It could have been because the product was cheap, aesthetically appealing, or simply something you have been motivated to buy for quite some time. Dan Ariely, author of Predictably Irrational, explores how individuals behave in ways that are irrational, yet do consistently, and predictably, without even realizing it. Individual’s irrational behaviors are not random, and we repeat the same mistakes over and over again making them predictable. Nevertheless, by understanding that individuals are predictably irrational, it will later encourage them to do something differently when making other consumer behavior
Rational choice theory asserts that economic agents perform market transactions with a predefined and complete set of preferences. Having limited information, budget and time to make a decision – consumers strive for the highest satisfaction, known as utility (Microeconomics). To buy at the same supplier again – previous satisfaction would prevail upon any other argument. Should the expectation have been met or exceeded – the search phase of a new decision process would be shortened, saving consumers valuable time and limiting cost, which in turn helps in maximising perceived value of the product. Hence, LPs would only be successful when designed to maximise customer-perceived value by either increasing the total offering’s benefit or cutting total consumer’s cost”.
In this paper I aim to tie the concepts of behavioral economics to issues in health economics. The goal is to use economics and psychology to explain how patients or physicians stray from the assumptions of the standard economic theory. In it through behavioral economic concepts that help researchers analyze and forecast patient or physician behavior. Behavioral economics has neumerous applications in the medical care field and these ideas can be used to create better health outcomes and stronger policies. I will be observing the economic issue of asymmetric information in certain spaces in the medical care field. According to the standard economic theory decision makers are fully informed have rational preferences with the aim to maximize utility. Behavioral economics literature examines patient and physician decision making through a variety of lenses such as the concepts of radical uncertainty and visceral factors. Through research and observation it is only “rational” to apply concepts of behavioral economics. In this sector uncertainty hovers above every decision where patients have limited information that influence decisions in the environment of fear make choices in the context of fear and trust in the physician. Every situation the medical field is unique to its own and this creates a great deal of uncertainties. These uncertainties can infiltrate decisions about diagnosis, treatment and prognosis. Since this is such a broad subject I will narrow it down to a few topics to explain the ideas. I will try to show patient and physician decision making capacity in risk situations and use the example of end of life care to make the argument tangible.
Becker, Gary. 1986. "Chapter 4: The Economic Approach to Human Behavior." In: Rational Choice. New York: New York University Press.
Solomon, M. R. (2012). Consumer behavior: Buying, having, and being (10th ed.). Upper Saddle River, N.J: Prentice Hall.
3. Write an essay explaining the notion of “consumer sovereignty” and explain where, in our current US healthcare system, you might find consumer sovereignty. (3 points)
Throughout history the connection between consumption and capitalism has played an integral part towards social changes that have occurred. As society changed so did the theories used to explain why these changes seemed the way they were. The sociology of Consumption has been rooted within sociological theory since its earliest days for example from Karl Marx’s ideas of utilisation of use-values (Marx, Engels and Arthur, 1972). However even within in these roots the influx of research only began to occur within last few decades. The sociology of consumption provides another route in which theorists can study society. As Marshall (1998) believed that sociology theory had for a long time been eclipsed by theories such as alienation and social class to name a few that are constantly being used to explain the basics of the social order and conflict with it. Although consumption has grown within the last few decided it’s not an easy term to define as there is not a standardised definition as many people believe when talking about consumption they already understand what is meant by the world. However it’s more likely they understand the word in terms of what it means to “consume” as the majority of society consumes on a daily basis.
Rockwell evaluates how doctors’ offices are open during all hours of the day (Rockwell 639). He argues, “But it can only stay open late because its offices are nestled in a strip mall where the rents are low and the access is high” (Rockwell 639). Ultimately, the purchase of goods by the people pays for the availability and connivance of medical assistance. Without access to urgent and everyday care, the mortality and illness rate would increase and cost more money overall. Rockwell states, “If you think through any service or good that is widely considered to be a need, you will find that it employs products, technologies, and services that were first created to meet superficial demands” (Rockwell 640). When society demands a product or service, the market has to find a way to financially afford the necessity. The consumption of goods helps provide opportunities and availability for the products consumers demand. While there are several benefits of consumerism, the effects of spending money only gives temporary fulfillment. Schor declares, “The increasing consumption of the last forty years has not made us happier. The percentage of the population who reported being “very happy” peaked in 1957” (Schor 635). However, it is important to balance the amount of spending versus saving. Consumers should not spend their money to gain happiness; instead, they should spend their money to support their needs and
Consumer behavior concentrates on how people settle on choices to invest their accessible assets (time, cash, exertion) on utilization related things that incorporates what they purchase, why they purchase, when they purchase it, where they purchase it, how frequently they purchase it, how regularly they utilize it, how they assess it after the buy and the effect of such assessments on future buys, and how they discard it.
Consumers make choices every day that affect the economy we live in, and in return these choices impact one’s personal finances. Take for instance, buying clothing at retail establishment that is trending,
2. Today marketers can collect and analyze data about consumer behavior, one person at a time; this is the relationship approach to marketing.
Consumer Choice Theory is a division of macroeconomics. It relates preferences to the expenditures incurred on consumption and to the consumer demand curves. It makes the analysis of how consumers maximize their consumption as it is measured by their preferences subject to restrictions on their expenses. The latter can be achieved through maximizing utility dependent on a user budget constraint. Consumption is different from production.The law of demand is dependent on the price of the goods (Cartwright, 2014). As the price of goods raises the rate of consumption falls even when the rate even when the consumer is financially compensated for the effect of high pricing. The latter brings about the effect of substitution. In any case, there is
Shiffman, L.G. & Kanuk, L.L. 2010. Consumer behaviour. 10th ed. Upper Saddle River. NJ: Pearson Prentice Hall.
The word of “hedonic” was defined as relating to the study of pleasure or pleasant and unpleasant experiences (Collins, 2014). However, consumption defined as the amount used or eaten, the act of using, eating, or drinking something, or the situation in which information, entertainment (Cambridge dictionary online, 2014). Hirschman and Holbrook (1982) introduce hedonic consumption as an explanation for the consumer behaviors that deal with the multisensory, fantasy and emotive phases of product usage experience. It was mean that consumer spending for the product influence by their physiological senses, imagination and some emotion for the product usage experience. Specifically, hedonic consumption involves emotional and affective experiences, sensual pleasure, fantasy, and fun (e.g., Adaval 2001; Dhar andWertenbroch 2000; Kivetz and Simonson 2002) and activates positive mood (e.g., Chaudhuri and Holbrook 2001). Hedonic consumption is for those consumers who are concern about their sensual, perception, mood to consume the product rather than consider the price and basic function of the product. It has always compared with utilitarian consumption. Hedonic consumption was in the purpose for fun or emotional involved whereas utilitarian consumption in the purpose of basic need. Consumers purchasing for pleasure care less about the price of that pleasure and consequently are more price inelastic for hedonic goods, whereas consumers making utilitarian purchases wish to get the most useful product for its price (Wakefield &
Consumer behavior is the study or the art of how people buy, what they buy, when they buy and why they buy. It refers to the actions and all the decision process of people who purchase goods and services for personal consumption. Consumption can be in any form and anywhere.