Individual demand is the demand made by competitive consumers.

The individual demand curve shows the amount of a product (goods) that consumers want to buy at the appropriate price at a given moment.

The geometric shape of the curve (negative slope) reflects the inverse relationship between the quantity demanded (Q) and price (P), as well as the declining marginal utility of each additional unit of the purchased good, which explains the fall in its price (Figure 8.1).

Individual demand is influenced by: the price of the product, the level of income of the consumer, the number of people in the consumer's family, his social level, the value system, the level of debt.

Figure 8.1 - Demand curve.

Movement along the demand curve (D) shows how a change in price (P) affects a change in quantity demanded (Q). At the same time, the position of the demand curve D remains the same, i.e. demand for the product has not changed.

The mechanism of the functioning of the market obliges to analyze situations in which many consumers and producers operate.

The concept of demand for a particular product reflects the behavior of the mass consumer. The volume of market demand for a given product is made up of the demand of many entities acting as buyers in a certain period of time.

On the market demand influence: the price of the goods, the income of buyers, the number of buyers, the preferences of buyers.

The market demand curve shows the demand of all consumers at any price and is the sum of the demand curves of all market entities(Figure 8.2).

Figure 8.2 - Individual (a) and market demand (b)

It can be constructed from individual demand curves (horizontally) for this product by adding up its quantities (Q D1 + Q D2 + Q D3) for which each buyer makes a demand at each possible price per unit of product. Like the individual demand curve, other than market demand will have a negative slope.

Conclusion

The emergence of the theory of consumer behavior was associated with the work of marginalists, since one of the main provisions of marginalism is the principle of economic man. The theory of consumer behavior explores a set of principles and patterns, guided by which each person forms and implements his own set of consumption of various goods, guided by the most complete satisfaction of his needs. This theory is associated with the concepts of total utility (that is, the total benefit from a certain amount of good) and marginal utility (the degree of satisfaction of needs with an increase in the amount of good).

For utility analysis, quantitative and qualitative theories were used. The quantitative theory of utility is based on the assumption that different goods can be compared based on a comparison of their utilities measured in specific units. Qualitative theory implies not an absolute, but a relative assessment of utility, which shows consumer preferences.

Graphically, the system of consumer preferences is depicted using indifference curves. This is the locus of points, each of which is such a set of two goods that the consumer does not care which of these sets to choose. When choosing one of two goods, the concept of the marginal rate of substitution arises. The marginal rate of substitution of good X for good Y is the amount of good Y that must be reduced by increasing good X by one unit so that the level of consumer satisfaction remains unchanged.

The choice of an individual is formed not only under the influence of preferences, it is limited by the budget. It is logical that for each consumer the total expenditure should be no more than income. Graphically, this is depicted using a budget line - a geometric locus of points representing combinations of two goods available to the consumer for a given budget.

A change in the price of a good affects the quantity demanded through the substitution effect and the income effect. The substitution effect occurs when prices change and leads to an increase in the consumption of cheaper goods. The income effect arises because a change in the price of a given good increases (when the price falls) or decreases (when the price rises) the real income, or purchasing power, of the consumer.

The study of consumer behavior is a complex science.

This paper outlines the basic concepts of the problems of consumer behavior, as well as the maximization of the good, but it is impossible to consider the entire general topic in one work. Therefore, summing up, I would like to dwell on the main conclusions made during the implementation of this term paper:

Choosing goods for consumption, the buyer is guided by his preferences;

The behavior of the consumer is rational, in particular, he puts forward certain goals and is guided by personal interest, that is, he acts within the framework of reasonable selfishness;

The consumer seeks to maximize total utility, in other words, seeks to choose a set of goods that brings him the greatest total utility;

The choice of the consumer and his subjective assessment of the usefulness of the purchased goods is influenced by the law of diminishing marginal utility;

When choosing goods, the possibilities of the consumer are limited by the prices of goods and his income; this constraint is called the budget constraint.

Along with the general principles of choosing a rational consumer, there are features that are determined by the influence of tastes and preferences on him.

Consumer choice is a set of benefits that brings the consumer the maximum total utility in the face of budget constraints.

Thus, we can safely say that on this topic of the course work, key points have been extracted that give us the most clear picture of the problems faced by the consumer, how consumer behavior changes under the influence of some specific factors and what motivates his choice.

consumer utility indifference demand

A change in a consumer's income changes the volume of his purchases. Let us trace the effect of a change in the buyer's money income on the acquisition of goods, assuming that the prices of goods, the tastes and preferences of the consumer remain unchanged.

On fig. buy-maximizing combination shown E, with income I, and prices of goods X And Y, respectively, P x 1 and P y one . With an increase in income, the buyer will be able to acquire more of the good. X, more good Y or more of both goods, which means the new equilibrium state of the consumer E 2 .

If we connect the tangency points of the indifference curves to budget constraints − E 1 , E 2 , E 3 , showing successive equilibrium positions of the consumer in accordance with the growth of his income, then we obtain income-consumption curve or standard of living curve.

If the income-consumption curve is a 45-degree ray from the origin, this means that with an increase in income, the consumer increases consumption and goods in the same proportion X, and good Y. If purchases increase disproportionately, then the slope of the curve changes. When the income-consumption curve slopes positively, goods are called normal goods. This means that higher incomes buy more goods, while lower incomes buy less.

Consumer behavior does not fit into a strictly defined and even more so formalized scale of preferences for buying one product over another. One can only talk about general principles that guide consumers when choosing products to buy.

The information obtained from the income-consumption curve can be used to construct the Engel curve for goods.

E. Engel in the XIX century. established a pattern in consumer behavior, according to which, as the income of buyers increases, the structure of consumption shifts towards expensive goods. Engel curve - expresses the relationship between the consumer's money income and the amount of goods purchased. At the same time, the share of income spent on the purchase of essential goods is decreasing, while the part of income directed to luxury goods is increasing.

_I_

P y 3

_I_

_I_ E 2

P y 1 E 1

Curve "income - consumption"

and construction of the Engel curve

On the one hand, a decrease in the share of expenses of the highly profitable part of the population spent on consumer goods does not necessarily mean that this category of citizens is reducing the consumption of the simplest goods.

On the other hand, the shift in the consumption of rich people to the area of ​​expensive and valuable goods can also occur by replacing cheaper goods and services that are "washed out" from the consumption zone. It is interesting to note that a change in the structure of consumption in accordance with Engel's law is observed not only in connection with what has already been received, but even in connection with expected income. At the same time, Engel's law is not absolute, since the structure of the needs of a number of people may not depend on the amount of income.

Considering the income-consumption curve, we proceeded from the constancy of the prices of goods. Now let us assume that income is a constant value, and we take the price of a good as a variable X. Let us assume that the price of a good X decreases, i.e. px 1 >px 2 >px 3, etc. Graphically, this looks like a shift in the budget constraint from the position KM 1 to position KM 2 (Fig. 6.2). A further price decline reflects the straight line KM 3 . Denoting the points of contact of the indifference curves U 1 , U 2 , U 3 with budget constraints points E 1 , E 2 , E 3 and combining them, we get the price-consumption curve.

K

0 M 1 M 2 M 3 X

px 2 Demand curve

X 1 X 2 X 3

The price-consumption curve ( but)

and building a demand curve ( b)

Based on this curve, you can build a demand curve (Fig. 6.2.b), in this case, the price of the product is plotted on the y-axis X(P x), and on the x-axis - the amount of good X. When analyzing the income-consumption curve, we considered the effect of a change in income; when analyzing the price-consumption curve, we considered the effect of price changes on the relative replacement of one good by another. It can be determined to what extent the change in demand for a good X caused by a change in price, and in some - real income. The descending nature of the demand curve reflects the law of demand: the lower the price of a product, the greater the quantity demanded. The fall in the price of commodities has at the same time a twofold effect.

It is possible to explain the operation of the law of demand based on the concepts of the substitution effect and the income effect.

First, buyers really increase their purchasing power. They can buy more goods for less money, and they have enough money left over for additional purchases. Secondly, the consumption of cheaper goods will increase, while consumption of goods that have risen in price will decrease. Let's consider each of these processes separately on the graph (Fig. 6.3).

K

FROM 0 . E 0 E 1

FROM 1 U 2

TO 2 E 2

FROM 2 U 1

0 X

F 0 M F 2 F 1 M 2 M 1

substitution effect income effect

The effect of consumer behavior on the market

The original budget line is marked KM. The consumer maximizes utility by choosing a "consumer basket" (clothes and food) at the point E 0 reaching the level of utility corresponding to the indifference curve U 1 .

When the price falls, the budget line passes through the line KM one . Now at the point E 1 on curve U 2 the consumer chooses his bundle of goods. Therefore, a decrease in the price of food allows for an increase in real income and an increase in the satisfaction of needs. First, the consumer buys OF 0 units of food, after the price change, food consumption increased to OF 1 , i.e. an increase in the volume of food purchases, represented by a segment F 0 F one . Against this background, there is a noticeable decrease in clothing purchases from FROM 0 to FROM one . Note that clothing is relatively expensive compared to food. This substitution is reflected by movement along the indifference curve. The change in food consumption associated with a change in food prices, provided that the degree of satisfaction (or real income) remains unchanged, is a substitution effect. It can be measured by drawing a budget line TO 2 M 2 parallel to the new budget line KM 1 , which reflects a lower relative price of food so that it touches the indifference curve U one . With a given budget line, the consumer purchases a set of goods at the point E 2 and therefore consumes 0 F 2 units of food. line segment F 0 F 2 represents the substitution effect, indicating an increase in the amount of food required with a decrease in their price.

substitution effect- a change in the structure of consumer demand (the ratio of funds allocated for the purchase of different goods) solely as a result of a change in the relative price of one of the goods.

Consider the change in food consumption caused by an increase in income with a change in price. In general, this will have an impact on average level prices and, consequently, on the amount of real income. The buyer has to pay less money to buy the same amount of food. As a result, he has an additional amount of money, which is tantamount to an increase in the income of the buyer. He can spend these additional funds on the purchase of any goods, including food products.

If we return to the previous graph, we can say that in this case, food growth with OF 2 to OF 1 was driven by the income effect. Graphically, the income effect is shown so that the budget line passing through the point E 2 , shifts to the budget line KM one . The consumer now purchases a set of goods E 1 on the indifference curve U 2 , not set E 2 on curve U one . The income effect reflects the movement from one indifference curve to another, and thus it can be used to measure the dynamics of consumer purchasing power.

income effect is a change in consumer demand solely due to a change in real income.

In the case of normal goods, the income effect and the substitution effect add up as there is an expansion in the consumption of normal goods.

Distinguishing between the income effect and the substitution effect is important for understanding pricing patterns under conditions of market economy and allows you to determine the change in demand with an increase or decrease in prices for goods and services.

Seminar task.

1. Giffen effect. Income and substitution effects for Giffen goods.

Similar information.

The theory of utility and analysis of consumer preferences. Consumer equilibrium: making decisions about the optimal choice. Ordinalist and cardinalist approach to the study of consumer behavior.

The theory of consumption proceeds from the fact that the goal of each consumer is to maximize utility, i.e. each buyer (consumer) strives to acquire with his income (budget) such a set of goods and in such a quantitative ratio as to satisfy his needs (requests) to the fullest extent. Therefore, the main task, or goal, of the theory of consumption is to reveal ways to maximize the degree of satisfaction of consumers with their needs, i.e. shopping gains. In this regard, there is consumer choice problem (rational) and factors influencing it. These factors are consumer preferences, as well as the amount of income and the price of goods and services.

When analyzing the problems, they proceed from the economic model of consumer choice, which is based on such assumptions regarding individual preferences as the possibility of assessing (measuring) the subjective utility of goods by the consumer; its ability to compare and rank alternative sets of goods, and thus prioritize; preferring a larger quantity of a product to a smaller one; preference transitivity. At the same time, transitivity of preferences means that if the consumer prefers set A to set B, and the latter to set C, he thereby prefers set A to set C. Transitivity also implies that if a person does not distinguish between alternatives A and B, between B and C , then he must not distinguish between A and C either.

The decisive factor that motivates behavior and determines consumer preferences and choices is utility. Utility is the beneficial effects received by people from the consumption of goods, i.e. a certain satisfaction (pleasure), reflecting the fact of the realization of their requests or needs. Utility is the satisfaction an individual receives as a result of consuming a good. First of all, one should distinguish between general utility. Total or cumulative utility is a value that characterizes the final (total) satisfaction from the consumption of a given amount of goods for a certain period of time

However, one cannot limit oneself to the concept of general utility. It is noted that as the needs are saturated and the overall utility increases, the intensity of each individual need decreases. In other words, as the amount of consumed goods increases and the corresponding need is satisfied, the utility of each subsequent unit of each good (additive utility) decreases. The utility of the last, or additional, unit of a good is called marginal (marginal) utility. Those. marginal utility of a particular good is the satisfaction (the amount of additional utility) received by the consumer with each new additional unit of the good, with all other factors of consumption held constant. marginal utility- the increase in total utility with an increase in the consumption of some good by one unit. Total utility TU gets a quantitative relationship with marginal utility MU:

Thus, the marginal utility of a certain good is the additional, additional utility from the consumption of each new unit of the good. This dependence is reflected in the formulated by economists the principle (law) of diminishing marginal utility, the essence of which is that the greater the quantity of a good consumed, the less the marginal utility derived from the consumption of each successive unit of that good . Relative prices reflect marginal utility. Therefore, the buyer behaves rationally, according to the theory of consumer choice, if he seeks to get the maximum benefit from the money at his disposal, i.e. he always prefers to purchase such a set of goods that provides the greatest satisfaction. Spending each monetary unit and striving at the same time to increase the total utility, the consumer sooner or later reaches a position in which the marginal utility per monetary unit spent on different goods is equalized. This will mean reaching a state of consumer equilibrium . A consumer equilibrium is a situation in which the consumer can no longer increase his total utility by spending his budget on an additional unit of any good.

Consumer equilibrium is reached when the ratio of marginal utilities individual goods equal to their prices. If we denote marginal utility as mu, then consumer equilibrium is ensured in the case of equality:

MUx/Px = MUx/Py = ... = MUn/Pn.

This is consumer equilibrium. in accordance with cardinal concept of utility - equilibrium is achieved if the “last dollar rule” is fulfilled: the marginal utilities per 1 (dollar, ruble, yen, etc.) of the costs that the consumer extracts by acquiring any good must be equal. I.e MUX/PX= MU Y /P Y , where MU X And MU Y- marginal utilities of the last units of goods acquired X and Y but R x And P Y- the prices of the respective goods.

Cardinal approach to the theory of consumer choice solved the issue about quantifying utility. This made it possible to answer two questions, the first one is how to quantify utility and how the subjective assessment of utility and its relationship with demand and price turns into a pattern.

The cardinalist approach proposed virtual units of utility evaluation that could not be linked to actual practice. However, if such an assessment remains absolutely hopeless for commodities, then the assessment of utility and marginal utility for factors of production is a widely and actively used practice up to the present day. Such an indicator of the utility and marginal utility of factors of production is their productivity and marginal productivity. The latter will determine the demand for factors of production and their prices in the market. But this will be discussed in a separate topic.

The second question is how the subjective assessment of utility, influencing demand and prices, turns into an objective law of demand. Since the subjective assessment of utility takes on a constantly recurring economic phenomenon that reflects a causal relationship between utility, demand and price in the actions of the dominant mass of people, this relationship takes the form of an objective economic phenomenon, the economic law of demand.

Let us consider this phenomenon using a hypothetical example, based on the possibility of quantifying utility and provided that the utility of any monetary unit remains constant.

Total utility (TU), marginal utility (MU) depending on the amount of goods (Q) is presented in the form of a table. We will betray the marginal utility monetary value, based on the condition - 2 units. marginal utility equal to 1 rub.

Individual and market demand.

ANSWER

In a market economy, demand is the main factor determining what and how to produce. Distinguish between individual and market demand.

The consumer's individual demand function characterizes his reaction to a change in the price of a given good, assuming that his income and the prices of other goods remain unchanged.

INDIVIDUAL DEMAND - the demand of a particular consumer; is the amount of goods corresponding to each given price that a particular consumer would like to buy in the market.

Rice. 12.1. Effect of price changes

On fig. 12.1 the consumer choice on which the individual stops is shown, distributing the fixed income between two blessings at change of the prices for the foodstuffs.

Initially, the price of food was 25 rubles, the price of clothing was 50 rubles, and the income was 500 rubles. The utility-maximizing consumer choice is at point B (Figure 12.1a). In this case, the consumer buys 12 units of food and 4 units of clothing, which makes it possible to provide a level of utility determined by an indifference curve with a utility value equal to U 2 .

On fig. 12.16 interrelation between the price for the foodstuffs and their required volume is represented. The abscissa shows the volume of consumed good, as in Fig. 12.1a, but food prices are now plotted on the y-axis. Point E in fig. 12.16 corresponds to point B in fig. 12.1a. At point E, the price of food is 25 rubles. and the consumer purchases 12 units.

Let us assume that the price of food has risen to 50 r. Since the budget line in Fig. 12.1a rotates clockwise, it becomes twice as steep. The higher food price increased the slope of the budget line, and the consumer in this case achieves maximum utility at point A, located on the indifference curve U 1 . At point A, the consumer chooses 4 units of food and 6 units of clothing.

On fig. 12.16 it is shown that the modified choice of consumption corresponds to point D, depicting that at a price of 50 rubles. 4 units of food are required.

Suppose that the price of food falls to 12.5 rubles, which will lead to a counterclockwise rotation of the budget line, providing a higher level of utility, corresponding to the indifference curve U 3 in Fig. 12.1a, and the consumer will choose point C with 20 food items and 5 clothing items. Point F in fig. 12.16 corresponds to a price of 12.5 rubles. and 20 units of food.

From fig. 12.1a it follows that with a decrease in food prices, clothing consumption can both increase and decrease. Consumption of food and clothing may rise as a fall in the price of food increases the purchasing power of the consumer.

The demand curve in fig. 12.16 depicts the amount of food that the consumer purchases as a function of the price of food. The demand curve has two peculiarities.

First. The level of utility achieved changes as one moves along the curve. The lower the price of a good, the higher the level of utility.

Second. At each point on the demand curve, the consumer maximizes utility under the condition that the marginal rate of substitution of food for clothing is equal to the ratio of food to clothing prices. As food prices fall, so does the price ratio and the marginal rate of substitution.

Change along the curve individual demand The marginal rate of substitution indicates the benefits delivered to consumers from goods.

MARKET DEMAND characterizes the total demand of all consumers at any given price of a given good.

The total market demand curve is formed as a result of horizontal addition of individual demand curves (Fig. 12.2).

The dependence of market demand on the market price is determined by summing the demand volumes of all consumers at a given price.

Graphical way the summation of the volumes of demand of all consumers is shown in fig. 12.2.

It must be borne in mind that hundreds and thousands of consumers operate in the market, and the volume of demand for each of them can be represented as a point. In this case, the demand point A is shown on the DD curve (Fig. 12.2c).

Each consumer has its own demand curve, that is, it differs from the demand curves of other consumers, because people are not the same. Some have a high income, while others have a low income. Some want coffee, others want tea. To obtain the overall market curve, it is necessary to calculate the total amount of consumption of all consumers at each given price level.

Rice. 12.2. Building a market curve based on individual demand curves

The market demand curve generally slopes less than individual demand curves, which means that when the price of a good falls, the quantity demanded in the market increases more than the quantity demanded by the individual consumer.

Market demand can be calculated not only graphically, but also through tables and analytical methods.

The main drivers of market demand are:

Consumer income;

Preferences (tastes) of consumers;

The price of this good;

Prices of substitute goods and complementary goods;

The number of consumers of this good;

Population size and its age structure;

Distribution of income among demographic groups of the population;

Sales promotion;

Household size based on the number of people living together. For example, the downward trend in family size will lead to an increase in demand for apartments in apartment buildings and reduced demand for detached houses.

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Individual differences in demand can be quite significant. Although, as noted above, the volume of demand almost always decreases with rising prices, the nature and specific form of this pattern for individual consumers may be different.

On fig. 1 shows the demand lines with different slopes, including those in extreme positions - in the case when the volume of demand does not depend on the price ( D 3), and in the limiting case of a strong dependence of demand on price ( D 4). The greater the angle of inclination of the curve to the price axis (i.e., the more flat it looks in the figure), the faster the volume of demand falls for the same price change: the curve D 1 shows a stronger dependence of demand on price than the curve D 2 .

Rice. 1. Demand line.

Individual differences in demand are due to many factors. Here are the differences in the level of income, and the dissimilarity of tastes and preferences; the latter, in turn, are influenced by national traditions, gender and age differences, differences in the level of education, etc.

The slope of the demand curve also depends on what share in the consumer's budget is the cost of this product: if this share is small, then the consumer reacts poorly to price changes. For example, if you're quite picky about the art level of movies and don't go to the cinema very often, doubling the ticket price probably won't make you go to the cinema less often. But if you often go to the cinema, just to pass the time, then doubling the price of tickets will force you to reduce the frequency of visiting the cinema.

So, different consumers, each with their own demand curve, appear in the market for some product. What will be the market demand curve in this case, i.e. the aggregate demand of all buyers combined?

At any value of the price that could develop in the market, the volume of demand of each buyer is the amount of goods corresponding to a given price, which the consumer himself considers necessary and desirable for himself; it is the volume determined by his individual demand curve. This is what is known as consumer sovereignty. The connection between market demand and the totality of individual consumers is determined by the following pattern: the volume of market demand at each price value is equal to the sum of the demand volumes of individual consumers at a given price value.

Assume that there are three consumers in the market for a certain good. Let's call them A, B, C; their individual demand curves are shown in fig. 2.

Rice. 2. Lines of individual demand of various consumers.

Consumer BUT at a price of more than 6 rubles. completely refuses to buy goods, and he does not need more than 30 units of goods at any price, no matter how small it may be (Fig. 2, but).

This is the meaning of the points marked on the price and volume axes. For simplicity, we assume that at a price of less than 6 rubles. the dependence of the quantity demanded on the price is linear. The demand curves for other consumers are of the same character.

Rice. 3. Summation of demand.

On fig. 3 all three individual demand curves are presented in one coordinate system D A , D B , D C and the market demand curve D.

If individual demand is given in a table, then the volume of market demand for each price value can be found by adding the corresponding values ​​of individual demand (this is illustrated in Table 1).

Table 1

Total demand

In view of the extremely simple (linear) form of individual demand curves, it is sufficient to calculate market demand only for "special" price values. The four points calculated in Table. 1 are plotted on the graph in Fig. 3, and since the sum of linear functions is a linear function, these points are connected by straight line segments. As a result, a three-link broken line is obtained - the market demand curve.

If the individual demand of each consumer is given analytically, then when summing individual volumes, it must be taken into account that at a price level above a certain threshold (for each consumer - his own), the volume of demand is zero. In our example

Equation (2) describes a broken line D in fig. 3.

Note that, as equation (2) shows, when moving along the market demand curve from top to bottom absolute values coefficients at R naturally increase due to the inclusion of new buyers and, in general, the market demand curve turns out to be convex down. This circumstance plays a significant role in the development of mathematical models of the market. Since the number of buyers real market is very large, the breaks in the market demand curve become indistinguishable and can be depicted as a smooth line.