Consumer behavior theory explains how buyers spend their income in order to maximize their needs. It shows how choice is influenced by product prices, income, preferences, and how buyers maximize their “net” gains from purchasing goods and services. This theory has a wide range of applications not only in making choices in market activities. She can explain, for example, how economic considerations influence decisions to marry, have children, and allocate time between work and play.
Consumer behavior in the marketplace is difficult to understand and explain. A lot of reasons affect the tastes and preferences of a person when he buys a product or service.
There are methods for predicting possible consumer behavior.
1. Marketing study of consumer behavior is guided by the needs and requirements of consumers. Marketing study is based on economic theory, scientific psychology and sociology.
2. System analysis. General principles and research methods are based on economic theory, explain consumer behavior and demand.
Within the framework of systems analysis, the study of consumer behavior begins with the study of his consumer choice, the reasons why he prefers one product to another.
Typically, three versions of consumer choice are analyzed. These versions are associated, firstly, with the study of the concept of marginal utility, secondly, with the calculation of the income effect and the substitution effect, and thirdly, with the analysis of consumer preferences.
Consumer choice according to the third version is the combination of consumer preferences with budget constraints, on the basis of which it is determined which combinations of goods consumers will choose to buy in order to maximize the satisfaction of their needs. The consumer cannot buy whatever he wants if each purchase depletes his limited monetary income. When faced with the economic factor of scarcity, the consumer must make compromises. He must choose between alternative values in order to get the most desirable set of products at his disposal with limited financial resources.
The choice that people will make, after they have correlated their desires with the available purchasing opportunities for certain goods, determines how much of the goods will be in demand. The dependence of demand on consumer choice is obvious. Demand is a concept that connects purchased goods with those sacrifices that have to be made to acquire these goods. That is, from the point of view of the behavior of buyers, demand is the desire and ability of people to buy goods or a certain ratio of the quantities of goods that are bought, and the costs of buyers - carriers of demand for the acquisition of this amount of goods.
Costs are usually divided into two groups:
1) monetary costs associated with the price;
2) non-monetary costs due to non-price determinants - subjective tastes and preferences, the number of buyers in the market, the average income of consumers, the price of related goods.
The theory of consumer behavior is an essential branch of economics. He studies the peculiarities of the psychology of the average person in certain situations. This topic is becoming extremely relevant in the modern capitalist world. This section of economics studies the formation of demand. Let's try to understand what the theory is
When a person purchases any product, he is guided by the ratio of its value to the volume of his personal funds. It is understood that the behavioral characteristics of the consumer are individual. When making a purchase, it is taken into account that a person proceeds from the limitedness of his budget. At the same time, the consumer always asks himself three main questions:
1) What exactly should you buy?
2) For what money?
3) Does the budget allow for the purchase?
Man is also guided by the principle of utility. That is, he chooses the products that have the most advantages over other options. Utility means the degree to which needs are satisfied. Product demand can be divided into two categories:
1) Functional. That is, a person buys products or services, guided by their consumer properties.
2) Non-functional demand. That is, an individual purchases products, guided not by its consumer properties, but by some third-party reasons. Non-functional demand is also classified into three types:
A budget constraint implies a certain framework beyond which satisfaction of needs cannot go. For example, a person receives a certain salary. On it, he will be able to purchase a limited number of goods.
Let's consider the main hypotheses on which the theory of consumer behavior is based:
1) The money budget of people is always limited.
2) Prices are set for all types of products and services.
3) Consumers make their own choice of a particular product.
4) All people when shopping strive for rational behavior. That is, they take into account the level of usefulness of the product.
Considering the consumer behavior model, one cannot fail to mention the factors influencing the choice of certain goods. This can include age, gender, educational level, any personal reasons. Consumer factors are also certain psychological aspects, that is, its character. The choice is influenced by the cultural level, for example, an individual can relate himself to any subculture. The social factor is also relevant to the issue under consideration. For example, it can be a person's attitude to a political group. is also important. It includes the level of a person's income, the cost of certain goods.
As it is obvious from the article, there are completely different models of consumer behavior. The formation of demand is influenced by a whole complex of interrelated factors. It is also worth noting that a clear and complete understanding of consumer psychology is extremely important in the world of market relations.
Actions directly related to the acquisition, consumption and disposal of products, services, ideas, including decision-making processes preceding this and subsequent actions, characterize consumer behavior. The need arising from the need or desire to consume various wealth (both material and spiritual) is considered the economic motive of a person. Needs form demand, which largely depends on the tastes and preferences of people, that is, on their subjective perception of the product or consumer preferences.
In economic theory, consumption refers to the process of using the results of production to meet certain needs.
Consumer behavior is methodologically based on the theory of marginal utility. The consumer buys goods and services to satisfy his needs, that is, he wants to get a certain utility from them. Consequently, utility is the pleasure or satisfaction that consumers receive from the purchased goods and services.
All people are able to compare the satisfaction received from different types of activities and products, and prefer some types over others. These preferences are "pure" as they do not depend on income and prices. "Pure" preferences do not yet represent actual buying choices. Desire becomes a choice, and the individual becomes a buyer when his preferences lead to actual purchases in the market. However, choices, as opposed to desires, are limited by income and prices.
The theory of consumer behavior also assumes that choice buyers behave rationally.
The mechanism that organizes consumer behavior is a motive, and the process of forming a motive is motivation.
First, the reasons for the motive are determined on the basis of the social and psychological characteristics of the consumer and the necessary requirements for the quality and quantity of goods. Next, a purchase plan is formed: the choice of a goal (quantity and quality of goods), ways to achieve it (how the goods on the market will be purchased), as well as an assessment of the subjective probability of achieving success and predicting the consequences.
As we know, the marginal utility per ruble of production while maximizing the total utility from consumption is the same for all products. In this case, the price of the product reflects its marginal utility, that is, the equilibrium of the consumer sets in with the unchanged purchasing power of money, which has received the name "Consumer surplus". The meaning of this concept is as follows: the consumer pays for each unit of goods the same price, equal to the marginal utility of the last, least valuable unit for him. And this means that on each unit of goods that precedes the last, the consumer receives some benefit.
So, consumer surplus- this is the difference between the amount that the consumer would agree to pay and the amount that he actually paid.
Let us explain the idea of consumer surplus graphically (Fig. 6.1 a). Let's draw a line through the points that characterizes the consumer's demand for a certain product. 
Rice. 6.1. Consumer surplus.
Point Р1- the maximum price that a consumer can and is willing to pay for one unit of goods. This is the marginal price of the product.
If she turns out to be higher P1 the consumer would not buy the product at all.
The consumer is ready to pay for the second unit of goods P2(the law of diminishing utility), etc. The real price of a product on the market Pn. Consequently, buying the first unit of goods, the consumer receives a consumer surplus in the amount of Р1 - Рn, buying a second unit of goods - in the amount P2 - Pp etc.
In the graph, consumer surplus is the area bounded at the top of the demand curve and at the bottom by the price line. The lower the price, the greater the amount of consumer surplus.
For example (see Fig. 6.1 b), if the consumer purchased only one unit of goods, then he would agree to pay 80 rubles. For the second unit, the consumer would pay 60 rubles, the buyer estimates the third unit at 40 rubles, and this marginal utility will determine the market price of all three units. Consequently, the market price paid by the consumer when buying three goods will be: 40 + 40 + 40 = 120 rubles. If we sum up the individual estimates of the marginal utility of each of the three units, then it would turn out: 80 + 60 + 40 = 180 rubles. Thus, when buying three units of goods, the consumer's surplus amounted to: 180–120 = 60 rubles.
We already know that the consumer, in his preferences for certain goods, encounters very significant obstacles: the price of the goods and the consumer's own income, that is, his budgetary possibilities. Let's consider the latter in more detail.
Consumer capabilities are characterized by lines budget constraint(budget lines). They show what combinations of two goods can be purchased at a certain price level for these goods and the amount of money income. If a buyer wants to buy a product X by price Px and goods Y by price Рy in certain quantities, then for the purchase of these two goods, he can allocate a sum of money equal to I, where / is the consumer's income.
The budget constraint equation is:
where Рх, Рy, Qx, Qy- respectively, prices and quantities of goods X and Y.
The meaning of the budget constraint is that the consumer's income is equal to the amount of expenses for the purchase of goods X and Y. Transforming the previous equality, we get: 
and 
If the consumer decides to spend all the income only on the purchase of the product A, then he will buy this product by the amount I / Px... If the consumer decides to spend all the income only on the purchase of the product V, then he will buy this product for the value of I / Py.
Let's draw a line through the indicated points, which will be called consumer budget line(fig. 6.2). 
Rice. 6.2. Budget line.
Any point on this line characterizes possible combinations of goods. X and 7, on which the consumer can spend his money, and is available to the consumer. All sets located above and to the right of the budget line are inaccessible to the consumer (dot V), so how to purchase a set V does not allow the real income of the consumer. Point WITH is achievable for the consumer, but in this case the consumer will not extract the maximum utility from his income, and therefore it is less preferable. The slope of the budget line is characterized by a negative price ratio (-Px / Py), which means the quantity of goods Y, which must be discarded in order to purchase an additional unit of goods within the cost of real income.
The specified price ratio measures the opportunity cost of consuming a good X and determines the rate of substitution of goods Y commodity X.
The behavior of the budget line obeys certain patterns. A change in income (while the prices of goods remain unchanged) leads to a shift in the line of the budgetary limit parallel to itself, since the price ratio (the slope of the line of the budgetary limit) will not change.
If the consumer's income decreases, the budget line shifts in parallel to the left and down towards the origin of the coordinate axes (line I ")(fig. 6.3). Conversely, if the consumer's income rises, his consumer ability will also increase and he will be able to buy more. The budget line will move up and parallel to the right of the origin of the coordinate axes. The distance from the budget line to the origin of the coordinate axes depends on the amount of consumers' income. 
Rice. 6.3. Budget line changes.
The slope of the line depends on the ratio of commodity prices X and Y.
First case: the prices of both goods increased proportionally, that is, they increased by the same number of times, while the value of the consumer's income did not change. Consumer opportunities have decreased, and the consumer's budget line has shifted parallel down to the center of the coordinate axes (corresponds to our example with the line I ").
Second case: the prices of both goods have decreased proportionally, which will mean an increase in consumer opportunities (income effect), and the consumer's budget line will shift upwards in parallel from the origin of the coordinate axes.
If prices and consumer incomes rise or fall at the same time, the position of the consumer's budget line will not change. Hence the conclusion: the meaning of income indexation is that the state can ensure (at least) a proportional shift in prices and incomes in order to prevent a decrease in the standard of living of the population. Social protection policy is, first of all, to ensure that the rise in prices does not outstrip the growth of income.
Third case: there was a change in the prices of goods relative to each other. The price of the product X remained the same, the goods Y- decreased (Fig. 6.3). In this case, the consumer will be able to buy more units of the product. Y without prejudice to the purchase of goods NS. This is where the income effect works. If the price of the goods Y increased, then the consumer without prejudice to the purchase of goods X will buy fewer units of a product Y.
To answer the question of how to maximize shopping satisfaction on a tight budget, we need to know which product bundle we prefer. Our preferences are expressed through indifference curves.
Indifference curve is a line, each point of which represents a combination of two goods that have the same general utility for consumption, and therefore the consumer does not care which of these sets to choose (Fig. 6.4). 
Rice. 6.4. Indifference curves.
For example, two products X and three goods Y have the same overall utility as three goods X and two goods Y, etc. The refusal from one of the goods is compensated by the receipt of another. To these product combinations X and Y the consumer is therefore equally indifferent. Nevertheless, any marked combinations of goods are equally good for the consumer, as they bring the same usefulness.
If, from the point of view of a given consumer, the sets and are equivalent, then the points A and B lie on the same indifference curve. The indifference curve above and to the right of the other curve represents the bundles of goods that are more preferable for a given consumer. So, set C contains the same amount of product Y as set A, but more product quantity X. Indifference curves farther from the origin correspond to a higher level of satisfaction. For example, since the curve U2 is to the right of the curve U1 then any set lying on the indifference curve U2, preferable to any set on the indifference curve U1. The set of indifference curves for an individual consumer and two different products is called a card of indifference.
Moving along the indifference curve from top to bottom means that the consumer is giving up a certain amount of the product. Y to get additional quantity of goods X. The convex nature of the curve indicates that the consumer is dealing with goods that are not considered fungible. The quantity of one product, from which the consumer is ready to give up in order to receive an additional unit of another, while remaining at a given level of satisfaction of needs (on a given indifference curve), is called Marginal Substitution Rate (MRS). The marginal rate of substitution can be represented as the ratio: 
In fig. 6.5 shows that as consumption of goods X increases for each additional unit (ΔX)(movement from point A to the point D) quantity of goods Y, from which the consumer is ready to refuse ( ΔY), decreases, i.e., the marginal rate of substitution decreases. 
Rice. 6.5. Marginal rate of substitution.
Indeed, the less scarce commodity X becomes, the less quantity of commodity Y we are willing to sacrifice in order to further increase its consumption. In other words, an increase in the quantity of good X leads to a decrease in its marginal utility. The slope of the indifference curve at each point is determined by the marginal rate of substitution multiplied by 1.
The nature of the indifference curve has a downward slope - a negative slope, because the ratio of Y and X has an inverse relationship (see the demand curve).
Indifference curves can take different forms. In fig. 6.6.
indifference curve U1 shows that the consumer deals with goods that do not differ in absolute fungibility. 
Rice. 6.6. Types of indifference curves.
For two completely interchangeable goods, the indifference curve will look like a straight line (Mrs= const). Usually such goods are treated as one.
Curve U2- goods cannot replace each other at all (right and left shoes). Such goods rigidly complement each other (the indifference curve is mutually perpendicular segments).
Curve U3 shows that the more a consumer has a product, the more he would like to have it. The indifference curve is concave towards the origin.
If you combine the indifference curve map and the budget constraint on the same graph, you can determine which product mix the consumer chooses to get the most satisfaction (Figure 6.7). 
Rice. 6.7. Optimum consumption.
The consumer will not choose a point A, in which the budget line crosses some indifference curve U1 and point V, because they are on a lower indifference curve. He will pick a point E, in which the budget line touches the indifference curve U2 above the curve U1.
Optimal product set for the consumer E contains QEX units of goods X and QEY- units of goods Y.
At the point E(point of optimum, or consumer equilibrium) the slopes of the indifference curve and the budget line coincide, therefore: 
Having regrouped the members of the last proportion, we get: 
So, at the consumer's optimum point, the ratio of marginal utilities is equal to the ratio of prices of consumed goods.
This condition is true for the problem of consumer choice with any number of goods.
In the case of two goods, the consumer maximizes his utility if two conditions are simultaneously fulfilled. The first is that Mrs for these goods should be equal to the ratio of their prices. The second condition is that the income allocated for the purchase of these goods is spent in full.
1. The theory of consumer behavior assumes that choice buyers behave rationally. Buyers always choose a product based on their income, which, under certain restrictions on retail prices, can best meet their needs.
2. The theory of utility assumes that the prices of goods are based on their value, defined as the subject's judgment about the significance of the goods at his disposal. Utility maximization rule in accordance with what has been said, it consists in such a distribution of the consumer's monetary income, in which the last ruble spent on the purchase of each type of product would bring the same additional (marginal) utility. Only changes in consumer preferences, food prices and incomes will be able to bring the consumer out of equilibrium.
3. According to the law of diminishing marginal utility, the value of each subsequent good when its stock increases, falls and reaches zero at the point of full saturation (Gossen's first law).
4. The consumer will receive the maximum utility from the consumption of a given set of goods provided that the marginal utilities of all consumed goods are equal (Gossen's second law).
5. The income effect is a change in the demand for a product as a result of fluctuations in the purchasing power of monetary income, caused in turn by a change in prices. The substitution effect consists in reducing (increasing) the consumption of a certain good while increasing (reducing) the consumption of other goods, if the price for it rises (decreases).
6. Consumer surplus is the difference between the amount that the consumer would agree to pay and the amount that he actually paid.
7. A budget line is used to depict the multitude of product kits available to the consumer. The lines of the budgetary limit show which combinations of two goods can be purchased at a certain price level for these goods and the amount of money income. The meaning of the budget constraint is that the consumer's income is equal to the amount of expenses for the purchase of goods Huh.
8. The indifference curve is a line, each point of which represents a combination of two goods that have the same overall utility for consumption, and therefore the consumer does not care which of these sets to choose. The indifference curve is usually convex towards the origin.
The consumer's optimum is achieved at the point where the budget line touches the indifference curve. At the consumer's optimum point, the ratio of marginal utilities is equal to the ratio of prices of consumed goods.
Economic theory: lecture notes Dushenkina Elena Alekseevna
7. Theory of consumer behavior
Consumer Is someone who buys goods or services for their own needs. Every person is a consumer from time to time.
Consumer expenses Is the largest sector of the economy. Even small changes in consumer spending can have a profound impact on the economy as a whole.
As a buyer, a person experiences the full complexity of the disability problem. His desires far exceed the resources needed to satisfy them.
But before you buy anything or set aside the available money, a person must earn it. There are two ways to generate income - to earn money through professional work and to use the wealth that you already have.
Professional income. Most of the money that the prospective consumer will earn is likely to come from wages. In exchange for his labor, he will receive a wage or salary. How much a person earns depends on the place of work, his abilities, diligence and some other factors.
Wealth income. Wealth is the value of all those things that a person owns. Summing up the value of all property, bank accounts, cash savings and other funds, you can get the total amount of wealth.
If wealth is used in a certain way, then it can generate income for its owner. For example, if you have a motorcycle, you can rent it to your friends for an agreed fee. If so, economists would say that you are using your wealth to earn rent. If wealth in monetary form is given to someone on a loan at interest or is also placed at interest in a bank, it brings its owner income in the form of interest on capital. Rent and interest on capital are two forms of income that can be earned from wealth.
The main task of any production is to meet the needs of a person and society as a whole. Need- this is a person's state, which reflects the contradiction between the desired and the available, but at the same time prompts him to action.
Production and needs are inextricably linked:
1) human needs are constantly growing, and production volumes are limited by available resources;
2) needs stimulate production, and production, creating new values, influences needs;
3) for constantly growing needs, it is necessary to increase production volumes;
4) the total consumption should be less than the amount of goods produced.
There are different types of classification of needs.
1. In relation to the scale and structure of production:
1) absolute, promising;
2) valid, necessary;
3) to be satisfied;
4) actually satisfied.
2.In terms of the level of development:
1) elementary (physical);
2) higher (social).
3. By the role of needs in the reproduction of labor:
1) physical;
2) intellectual;
3) social.
4. Depending on the social structure of society:
1) the needs of society as a whole;
2) the needs of social groups;
3) the needs of individuals.
But on the way to meet needs lies the limitedness of economic resources, since all types of resources, namely land, labor, capital, entrepreneurial ability, are relatively rare, that is, their volume is not enough to meet the infinitely growing needs.
The problem of choice is one of the central ones in modern economic science.
Consumer choice is influenced by:
1) personal factors:
a) age;
b) education;
2) psychological factors (for example, selective memorization and distortion, character, temperament);
3) cultural factors (for example, belonging to a subculture);
4) social factors (belonging to a particular social group or political party);
5) economic factors (income, commodity prices, total and marginal utility).
The theory of consumer behavior, which studies the mechanism of interaction between human needs and individual demand, is based on several hypotheses:
1) the income of all consumers is limited;
2) prices are set for all goods and services;
3) all consumers make their choice independently, independently of each other;
4) each consumer seeks to behave rationally, i.e.
to increase the maximum usefulness for yourself.
The usefulness of the product (service) for each person is individual: one likes to have a good rest, the other prefers to eat well.
Utility Is the property of a product to satisfy one or several human needs.
The theory of marginal utility and the law of diminishing marginal utility were discussed above.
Graphically, consumer preferences can be represented using indifference curves, which are a collection of consumer sets that provide the same level of satisfaction of needs (Fig. 7).
Rice. 7. Indifference curve
The set of goods A and B at each point on the indifference curve brings the same total utility to the consumer.
For example, if the indifference curve passes through points (6; 4) and (2; 7), then this means that a set of 6 goods B and 4 goods A brings the consumer the total utility corresponding to a set of 2 goods B and 7 goods A.
The indifference curve corresponds to some constant value of the total utility. Any other measure of total utility would have a different indifference curve. For each consumer, an infinitely large number of indifference curves can be plotted. This graph is called the “map of indifference” (Fig. 8).
Rice. 8. Map of indifference
Moreover, any set of goods corresponding to each point on the U2 indifference curve brings the consumer more aggregate utility than any set of goods corresponding to each point on the U1 indifference curve.
Indifference curves have several properties:
1) indifference curves cannot intersect;
2) indifference curves are convex;
3) the indifference curves have a negative slope, and the slope is the ratio of the marginal utility of product A to the marginal utility of product B.
All of the above applies to standard sets of products. However, there are other forms of curves that characterize the peculiar tastes of consumers:
1) indifference curve- a horizontal line (for example, a student will not take a single pie with cabbage, no matter how many they are given to him, instead of a pie with apples, if he simply does not like cabbage);
2) indifference curve- a vertical line (for example, a student will not give a single pie with an apple, no matter how many pies with cabbage he is offered in return - he does not eat pies with cabbage);
3) indifference curve of interchangeable goods(for example, a student does not care what to eat - a pie with an apple or a pie with cabbage); hence, the indifference curve will be a straight line with a negative slope;
4) complementary goods indifference curve(for example, threads and needles are complementary goods, so any increase in the number of spools of thread will not increase the usefulness of the needles); the indifference curve has the form of a right angle.
As mentioned above, the consumer's choice is limited by his monetary income and prices of goods. In its simplest form, the consumer's budget constraint when choosing two products can be represented as a budget line (Fig. 9).
Rice. 9. Budget line
Each point of the budget line corresponds to a set of goods A and B, which a consumer can purchase with a given income and prices of goods. Any change in income or prices will move the budget line. If the consumer's income increases, then the budget line shifts from position 1 to position 2. If the price of good A decreases, this will move the end of the budget line 1 to position 3.
By combining an indifference map and a budget line in one graph, you can get a consumer choice graph.
The point of intersection (E) is called the point of consumer optimum, since it is located on the highest (available to the consumer) indifference curve (Fig. 10).
Rice. 10. Schedule of consumer choice
A decrease in the price of a product leads to the following effects:
1) income effect- product price reduction; allows the consumer to buy more of the product at the same level of income, that is, there is an increase in real income;
2) substitution effect- a decrease in the price of a product makes it more profitable for purchase, which leads to an increase in the consumer's desire to replace them with relatively more expensive goods.
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2.2 Theory of consumer behavior (choice)
Product utility and marginal utility
People as consumers are very different from each other in their tastes and preferences, that is, their likes and dislikes in relation to any goods. Based on this, preferences affect demand, and hence the producers of goods. The consumer's ability to influence the production of a product is called consumer sovereignty. A necessary condition for sovereignty is freedom of consumer choice.
Economic theory studies the behavior of a rational consumer. Consumer rationality is a person's ability to compare all combinations of goods and services available to him and choose the most preferable ones.
Consumer choice is based on needs, preferences, income and prices.
Consumer behavior is the process of forming consumer demand for a variety of goods, taking into account their income and personal preferences.
Obviously, the consumer purchases a product for the sake of its property, which is called utility. Distinguish between general and marginal utility.
General utility of an economic good is the total utility of all the constituent parts of the consumed good.
Utility as an economic category means the ability of a product (products, goods, services) to satisfy certain needs of people. Note that the ordinary understanding of utility as the properties of things to have a beneficial effect on a person, to help strengthen his health and spirit differs from economic understanding. In an economic sense, cigarettes are useful, for example, because they satisfy the needs of smokers. Such needs, alas, exist, although they are considered harmful.
In economic theory, utility is considered to be a quantitative, measurable quantity. Even the name of the conventional unit of utility has been introduced - yutil (from the English word utility meaning "usefulness").
The utility of each additional unit of the consumed good is called the marginal utility.
Marginal utility represents the increment of the total consumer effect from a certain good (goods, services), achieved through the consumption of each additional unit of this good.
Laws of diminishing marginal utility
The tendency for marginal utility to decrease as the amount of good consumed increases is called the law of diminishing marginal utility.
According to this law, each subsequent unit of the consumed good has a marginal utility lower than the previous one, that is, the additional consumer effect obtained from an increase in goods by one unit is lower than the effect obtained from the previous unit.
This law can be illustrated by many examples. For example, each additional cup of coffee you drink in the morning is less beneficial than the previous one.
Or, let the usefulness of a suit be measured by the number of yutils equal to the number of days in a year that a person wears the suit. We will proceed from the assumption that the consumer of the suit wears each of them for the same number of days, i.e., if he has one suit, he wears it 365 days a year, if there are two suits, he wears each of them 182 days, if three suit, then the suit is worn for 122 days, and so on, that is, the utility gain is 365 divided by the increasing number of suits.
Utility maximization rule
The essence of the utility maximization rule is as follows: the consumer's income should be distributed in such a way that every last dollar spent on the purchase of each type of product would bring him the same additional (marginal) utility.
The combination of goods that maximizes utility will correspond to the point lying on the highest indifference curve available to the consumer.
The consumer's budget is used in the best way if the marginal utilities for each type of product / service are equalized, based on the last ruble spent. Indeed, if the ratio of marginal utility to the price of product A is higher than the positive effect of the ruble spent on product B, then the consumer will increase consumption of product A.
The consumer must choose between various goods in order to receive at his disposal the most preferable, from his point of view, set of goods and services, with a limited monetary income.
The rule of consumer behavior is that each subsequent unit of monetary costs for the purchase of goods brings the same, that is, additional utility.
Indifference Curve and Indifference Curve Map
Indifference curve is a curve that reflects different sets of goods for the other two goods that are of equal utility to the consumer.
Indifference curves were first introduced into economic analysis
F. Edgeworot. They allow, instead of a quantitative measurement of utility, to use an ordinal measurement in the form of a ranking (gradation) of utility.
The set of indifference curves is called the indifference curve map (Figure 10).
Rice. ten. Indifference Curve Map
Indifference curves have the following properties:
1) Through any point in space, you can draw a curve of indifference;
2) The indifference curves do not intersect. The point of intersection of the two curves would mean that at that point they have the same utility, which contradicts the definition that each indifference curve reflects equal but different utility;
3) Commodity sets located on indifference curves are more convenient from the origin, more preferable in comparison with commodity sets on less convenient curves. This property follows from the fact that, as the distance from the origin of coordinates increases, commodity sets contain an increasing amount of both goods, and, therefore, have greater utility for the consumer;
4) Curves of indifference have a negative direction. This is due to the fact that, moving along the curve, we give up a certain amount of one good, replacing it with another, so that the total utility remains unchanged;
5) The indifference curve is concave.
Indifference curves have an important advantage over the concept of marginal utility in that they do not measure utility itself.
Indifference curves are not only a purely theoretical tool. They are very useful in business practice, helping to make the right decisions regarding consumer preferences.
Consumer budget line
The consumer budget is a balance of family income and expenses, which characterizes the existing standard of living of various social groups.
The budget line shows the different combinations of two products that can be purchased for a fixed amount of cash income.
Each point of the straight line shows how many goods A and B can be purchased by a consumer, having a fixed income and spending it completely on the purchase of these two goods, provided that the price of these goods does not change (Table 3).
Table 3
Consumer total income
Item A units |
Item B units |
Total income |
The budget line (Fig. 11) is a collection of points, each of which shows a certain combination of two goods A and B, which can be purchased by completely spending all the income. All dots to the left of the budget line characterize possible choices for the consumer: he may well purchase the appropriate combination of two goods. However, at the same time, his budget will not be used in full. Any points to the right of the budget line are outside the budgetary capacity of this consumer. Market decisions corresponding to these points cannot be made. 
Rice. eleven. Budget line
The OSD triangle defines the budget space. All points outside the budget space reflect the more desirable goods for the consumer, but not available for a given income.
The steeper the budget line, the higher the price ratio of the two goods and the more Y must be sacrificed to obtain an additional X unit.
The consumer is open and accessible only to those market solutions that allow his wallet to accept. This important constraint is called budget constraint. Graphically, it can be depicted in the form of some line outlining the field of possibilities (selection field) of the consumer.
Consumer balance. Substitution effect and income effect
The consumer's equilibrium corresponds to a combination of goods X and Y that maximizes utility for a given budget constraint and at which the consumer has no incentive to change it for another.
The substitution effect is a change in the volume of demand caused solely by a change in the relative price of a good at a constant real income. The decrease in the price of a product means that it is now cheaper in relation to all other goods. Therefore, the buyer will try to replace other goods, which have now become relatively more expensive, with a cheaper product. Reducing the price increases the relative attractiveness of the product and forces the consumer to strive to purchase it in greater quantities.
The income effect is a change in the volume of demand caused solely by a change in real income while relative prices remain unchanged. The effect of income on lowering the price of good X is an increase in consumption of good X due to an increase in welfare. When the price of goods X falls, it becomes relatively cheaper than other goods, and therefore more attractive to consumers, namely, the consumption of goods X will increase due to reductions in the consumption of other goods. This phenomenon is called the substitution effect.
