Two Main Approaches To The Theory Of Consumer Behaviour To Demand In Economics Analysis
According to him ‘utility’ is the basis on which the demand of an individual for a commodity depends ‘Utility’ is defined as the power of a commodity or service to satisfy human want. Utility thus is the satisfaction which is derived by the consumer by consuming the goods. For example, cloth has a utility for us because we can wear it. Pen has a utility for a person who can write with it. The utility is subjective in .nature. It differs from person to person. The utility of a bottle of wine is zero for a person who is non drinker while it has a very high utility for a drinker Here it may be noted that the term ‘utility’ may not be confused with pleasure or unfulness which a commodity gives to an individual. Utility is a subjective satisfaction which consumer gets from .consuming any good or service. For example,. poison is injurious to health but it gives subjective satisfaction to a person who wishes to die. We can say that utility is value …show more content…
Economist Vilfredo Pareto developed this modern approach to consumer behavior. Under this, that analysis of consumer behavior is described in terms of consumer preferences of various combinations of goods and services depending on the nature, rather than from the measurability of satisfaction in our previous discussion of the utility theory. Under the latter theory, consumer's taste and preferences were presented by the way of total and marginal utility.
An indifference curve is a locus of points each of which represents a combination of goods and services that will give equal level of satisfaction to a consumer. To illustrate this, we consider an individual who prefer a combination of 2 goods, say, food and clothing. Table 3 shows the combination of the quantities of the commodities that a consumer prefers. Let us assume that he is indifferent to any of the combination of food and clothing.
Table 3. Indifference Schedule (Food and Clothing)