Consumer behavior involves how individuals make decisions to acquire and use products and services. It is influenced by cultural, social, personal, and psychological factors. Consumer satisfaction depends on the perceived performance relative to expectations. Consumer surplus is the difference between the maximum price a consumer is willing to pay and the actual price, representing value received but not paid for. Producer surplus is the difference between the total revenue received by producers and the total variable costs of production. Monopolies can reduce output and create deadweight loss, where economic welfare is lost due to distortions in prices and quantities.

1. Consumer Behavior & Consumer Surplus
Consumer Behavior
Consumer: who consume the product
Customer: who custom the product
Behavior: human activities that can be observed,
recorded, and measured.
Consumer behavior: consumer behavior is the action and
decision process and physical activity individual engaged
in when evaluation, acquiring, using or disposing of
goods or services.
Views of the Consumer
i) Economic man: who makes rational decisions.
ii) Passive man: who are relaxed in buying process
iii) Cognitive man: who evaluates buying logically
iv) Emotional man: who buy out of emotion
v) Complex man: who creates complexity in buying

2. Characteristics of Consumer Behavior
a) Learned behavior: repetition, work, habit, tanning
b) Motivational behavior: S – O – R
c) Mental process: complex mental process
d) Internal factors: perception, attitude, personality
e) External factors: culture, beliefs, values, norms
f) Different roles: same person plays different roles
g) Varied behavior: differ from one person to another
h) Maintain sequence: focus most important fact first
i) Consumer surplus: mental price> actual price
j) Consumer deficit: mental price< actual price
k) Business Process: involved transaction and exchange
l) Combination: of various activities, planning to decision
m) Black box: it acts as a black box.

3. Factors Affecting Consumer Behavior
1) Cultural Factors: cultural factor exert a broad and deep
influence on consumer behavior. The marketer needs to
understand the role played by the buyer’s culture, sub
culture, social class.
2) Social Factors: a consumer's behavior also is
influenced by social factors, such as the consumer's
small groups, family and social roles and status.
3) Personal Factors: a buyer's decisions also are
influenced by personal characteristics such as the
buyer's age and life cycle stage, occupation, economic
situation, lifestyle, and personality and self-concept.
4) Psychological Factors: buying choices are further
influenced by four major psychological factors;
motivation, perception, learning, beliefs, attitudes.

4. Consumer Satisfaction
Customer satisfaction: is a function of perceived
performance & expectation of customer about a product.
1. Perceived Performance: is the difference between
Total customer value and Total customer costs.
i) Total customer value: i) product value ii) service
value iii) personal value iv) image value.
ii) Total customer costs: i) monetary cost ii) time cost
iii) energy cost iv) psychic cost.
2. Expectation of Customer: customer expect from the
existing product; it depends on the following factors
i) past experiences ii) friends iii) associates
iv) competitors v) marketing activities.
Measuring Customer Satisfaction
i) complaint & suggestion systems ii) customer
satisfaction surveys iii) ghost shopping iv) lost customer
analysis v) sales and profit analysis.

5. Consumer Surplus
Consumer surplus is the difference between the potential
price and the actual price of a customer.
N. mango MU MP (tk.) CS
• 01 50 25 25
• 02 40 25 15
• 03 30 25 05
• 04 25 25 00
• Total 145 100 45
-------------------------------------------------------------------------
• 05 20 25 -- 05
Consumer surplus = 45
Consumer deficit: opposite of consumer surplus.
Consumer deficit = -- 05

6. D
Di
Y
R
M
D
0
A B C
X
P
S
N
Quantity
Price
Y
P
0
N
R
B
M T
S
Q
MR
X
Consumer’s Equilibrium
CS
A C

7. Criticism of Consumer Surplus
i) Marginal money is unchanged: but it is fluctuated
ii) It depends on demand schedule: but it is difficult
iii) Taste and income is equal: different from man to man
iv) No substitute: but this not realistic
v) No complementary product: it is exist in the market
v) It is not applicable: for emergency and luxury product
vi) Difficult to calculate: it is complex mental process
vii) Economic point: of view it is hypothetical & unrealistic
Practical Applications of Consumer Surplus:
i) Difference between exchange value and use value:
price is exchange and potential is use value.
ii) Comparative study: use of tk.500 in Bangladesh & Italy
iii) Monopoly business: high price & no consumer surplus

8. Practical Applications of Consumer Surplus:
iv) For international trade: satisfaction between foreign
and domestic product.
v) Tax fixation: avoid the taxes where surplus is absence
vi) Cost &benefit: use it in cost and benefit analysis.
Consumer’s Equilibrium: consider only one product
i) Want and income: wants are unlimited and income is
limited. How to satisfy the want with the limited income.
ii) Satisfaction: when he distribute his limited income for
buying different product and gets highest satisfaction,
then he reach the level of equilibrium.
iii) Marginal utility: purchase quantity depends on his
marginal utility and when marginal utility is zero (0), he
does not buy more units.

9. Producers Surplus
Producer’s surplus is defined as the amount that
producers are paid for a product less than the total
variable cost of producing the product.
Total revenue – Total variable cost = producer’s surplus.
In the figure, SS is the supply and variable cost curve and
variable cost is OQES. PPi is the market price. OQEP is
the total revenue.
Producer’s Surplus is OQEP – OQES = SEP
Deadweight Loss: the terms refers to the loss of economic
welfare arising from distortions in prices and output such
as those due to monopoly, tariffs or quotas. The net loss
of economic welfare is called deadweight loss.
In the figure, E is the efficient point level of production at
which MC = AC; at the price level100, the output is 6
units. But monopoly reduce output below E; at the price
level150, the output is 3 units.

10. Y
0 X
OQEP – OQES = SEP
Producers surplus
Y
150
0 X
CS
Deadweight loss
.
.
.
.
.
.
.
.
.
P
S
D
Si
E
Q
D
100
AC=MC
MR
3 6
D
E
D
Monopoly and Loss
B