CONSUMER CULTURE AND BEHAVIOUR

Consumer Culture and Behaviour

Consumer Culture and Behaviour

Consumer Behaviour

The demand curve is one half of the familiar supply-and-demand graph that determines price and quantity exchanged in a perfectly competitive goods market. This curve shows the relationship between the price of a commodity and the quantity that buyers are willing to buy at each given price, holding all other factors constant. (Tiffany, 2010)The shape of the curve, as well as how it shifts when various other factors do change, is explained by the theory of consumer behaviour. The most important aspect of consumer theory is its conclusion that (in almost all circumstances) the demand curve for a commodity is downward sloping. This relationship is the familiar “law of demand” first articulated directly by Alfred Marshall (1842-1924) in his Principles of Economics. Consumer theory applies equally well to tangible goods and intangible services; the words goods and commodities are often used interchangeably (Andreassen, 2000, 156-75).

Early consumer theory grew out of the work of several economists who developed the idea that the happiness or “utility” that a consumer receives from successive increments of a commodity declines. This idea has come to be known as the principle of “diminishing marginal utility.” When consumers are deciding how to allocate a fixed budget among various commodities, diminishing marginal utility guides them to spend more on a commodity if its price falls relative to the prices of all other commodities. An argument for a downward-sloping demand curve can be made based on this principle. However, without a reliable way to measure utility, the law of demand rests on a shaky foundation. (Dallimore, 2007, 78-79) Fortunately, later economists developed a theory of the consumer from which the law of demand can be derived without reference to measurable utility. Modern consumer theory is a mathematical theory of rational choice. Individuals or households are assumed to have the ability to rank all possible combinations or “bundles” of commodities they might possibly consume. They choose the highest ranked bundle they can afford given their income and the prices of the commodities. The impact of an increase in the price of a commodity on the quantity demanded by an individual buyer depends on that buyer's reaction to two separate but related effects: the increase in the price of the good relative to the prices of all other goods (the “substitution effect”) and the decrease in the purchasing power of the consumer's ...