ECONOMIC ANALYSIS FOR DECISION MAKING
...ns to maximise their satisfactions Human beings have wants, which are unlimited in number. The means at their disposal to satisfy them are not only limited but have alternative uses. Economic Analysis of Consumer Behaviour Human wants are unlimited and they are of different intensity. The means at the disposal of a man are not only scarce but they have alternative uses. As a result of scarcity of resources. The consumer cannot satisfy all his wants. He has to choose as to which want is to be satisfied first and which afterward if the resources permit. The consumer is confronted in making a choice. For example, a man is thirsty. He goes to the market and satieties his thirst by purchasing coca-cola instead of tea. We are here to examine the economic forces, which make him purchase a particular commodity. The satisfaction in technical term, a consumer purchases a commodity because it has utility for him. We now examine the tools, which are used in the analysis of consumer behaviour. Theory of Consumer Behaviour Human beings have wants which are unlimited in number. The means at their disposal to satisfy them are not only limited but have alternative uses. If the means had been unlimited, we would have satisfied most of our wants, then few economic problems would have faced man. As the means are limited and we cannot buy as much as we can, therefore the problem of choice arises. We try to satisfy the most urgent wants first and the less urgent afterwards. The prices of the commodities in the market are fixed. It is not possible ordinarily for the individual to alter the prices of the commodities quoted in the market. He has to adjust his expenditure according to the prevailing price. He consciously or unconsciously continues choosing and substituting one good for another till he reaches the highest level of satisfaction. When he has made the best combination of the goods he has chosen, he would not like them to readjust or depart from this set of combination unless there is a change in his income or the prices of the commodities which he has to pay or the prices of the substitutes, etc. etc. Summing up, we can say that a consumer when faced with limited means and unlimited wants consciously or unconsciously utilize his scare recourses in such a manner that he attains the highest level of satisfaction. This is consumer’s equilibrium point, a point from where he would not like to depart unless the price of the commoditi8es or his income changes. The theory of consumer behaviour can be explained with the help of utility app...