Workshops that discuss the best advertising strategies are more popular than ever. The fact is that the modern markets of developed countries are oversaturated. And you can sell a product only by somehow isolating it from many similar ones. Therefore, it is very difficult to bring a new product to the market , it is difficult to enter the sphere in which many manufacturers are already moving. However, if this is necessary, then business owners take up books that describe what consumer choice is. Well, or hire those who read such books at the university. So, more about consumer choice.
This theoretical construction belongs to microeconomics. And he considers how the preferences in the choice of services and goods and the general expenses for the consumption of various goods are related. In general, the relationship between personal preferences spent on money consumption and the demand curve has been considered in the economy for a long time and has been of great interest to economists for decades. Consumer Choice Theory analyzes how consumers try to strike a balance between preferences and costs by maximizing the benefits of the goods they acquire. The needs are unlimited, but there are always budget constraints, so even the most impractical buyer is trying to get what will be most useful to him at minimal cost.
Preferences are the desires of each individual to consume goods or services, which in reality manifest themselves as a choice of real options depending on income (possession of wealth). It is also important the time appointed by the consumer in order to use the goods and services. Consumer choice and its features are on the border of studying microeconomics and psychology of consumption.
Researchers use models and graphs to predict the popularity of a product. Usually the data obtained from the sale of a certain product of the same class is used. Scientists believe that consumers will seek to optimally use resources within their budget. What variables are used in such calculations? Unit price, prices for very similar products and consumer wealth.
As prices rise, consumers will increasingly turn to other, cheaper alternatives. And this is clear from everyday logic even to a person who has not studied economics. After all, if a person cannot afford one copy of a product, consumer choice will be directed towards a more inexpensive equivalent. This is called the substitution effect. But if income grows, then the demand for goods as a whole increases, in this situation, consumers will look for better, albeit expensive, goods. This is the effect of income.
Of course, the theory of consumer choice has flaws. The point is in some assumptions that introduce inaccuracies in the calculations. For example, the theory under discussion assumes that each person is constantly aware of his preferences when he needs to make a purchase. It is also inaccurate that if two products are identical, then the consumer realizes them as absolutely equal, which is actually not true. It is also automatically considered that if the first product was preferred to the second, and the second to the third, then the first product would be more likely to be chosen than the third. As we can see, economic analysis sees the client as a logical and accurate machine. But there are other factors affecting consumer choice.
Very interesting are the arguments of economists about the choice between consumption and rest. Consumption requires making money, that is, labor. And rest involves the rejection of work and non-dedication of his generally limited time to work. Here, every person makes a choice every day , and this choice is usually not easy. Such an application of the theory is interesting, understandable to people far from economics.