Theory of Consumer Behavior

The Theory of Consumer Behavior

The theory of consumer behavior is based on the idea that a unit or household will spend their incoming in a manner that will guarantee the maximum benefit (not necessarily a monetary profit but usefulness). In tough economic times, like those we currently live in, this theory is used by most responsible consumers. Unemployment is at an all-time high and pries on everything from gas to groceries are increasing daily. Consumers have to determine the best method to help them get an increase value on each dollar. The theory of consumer behavior can be used to help explain many behaviors that affect the economics of our world.

In our daily lives there are numerous opportunities for this theory to be used, such as in accepting a job. In accepting a job there are numerous things we consider. A rational job seeker will choose the job where they will receive the most benefits. For example, rate of pay is a determinant for many. A rational person will accept a job that is paying $25,000.00 annually than one that pays $15,000.00 annually. Just as consumers try to maximize the usefulness of their income spent, job seekers to find a job that offers the most benefit.

In some instances benefits on a job are as equally important as the pay rate, if not more important. Some people can only work certain hours so that may be a selling point for them. For example, a single mother may accept $2,000.00 less annually to work an 8-5 shift, so she is available for her children. According to the theory of consumer behavior this would be logical as family time is more valuable as well as the fact with another schedule she may need to hire a sitter, thus increasing the outflow of income from her home.

The same holds true for other jobs related benefits as well. The person who has high prescription cost will normally give up some benefits to ensure medical insurance coverage. The theory of consumer behavior also sheds light on the importance of budgeting. A good budget will allow one to know what income they have coming into the home opposed to the income that goes out of the home. It also allows one to determine what they are spending money on. This realization helps the consumer in reference to future planning and saving. It gives insight on your economic stability and ability.

In our weekly scripture, Genesis 41:28-29, we find Joseph has the people preparing for famine in the time of surplus. So when the famine came not only were they provided for, they were also able to assist their neighboring countrymen. This scripture reminds us that we should always save and prepare. Life is very unpredictable and just because we are financially secure today does not mean that we will be tomorrow.

The theory of consumer behavior holds that rational consumers try to make sure