1. Economic Model Consumer Behaviour

Economic model of Consumer Behaviour

In this model, consumers follow the principle of maximum utility based on the law of diminishing marginal utility. The consumer wants to spend the minimum amount for maximizing his gains. Economic man model is based on:
Price effect: Lesser the price of the product, more will be the quantity purchased.
Substitution effect: Lesser the price of the substitute product, lesser will be the utility of the original product bought.
Income effect: When more income is earned, or more money is available, more will be the quantity purchased.

This model, according to behavioral scientists, is not complete as it assumes the homogeneity of the market, similarity of buyer behavior and concentrates only on the product or price. It ignores all the other aspects such as perception, motivation, learning, attitudes, personality and socio-cultural factors. It is important to have a multi disciplinary approach, as human beings are complex entities and are influenced by external and internal factors. Thus, price is not the only factor influencing decision-making and the economic model according to scientists have short comings.

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Consumer Behaviour Topics