The document discusses consumer behavior and utility analysis. It explains that consumers allocate their limited income rationally to purchase goods and services that provide the most utility or satisfaction given their preferences. Consumers face budget constraints and make choices based on prices and how much marginal and total utility they expect to receive from different purchases. Producers aim to lower prices to increase demand for their products.

1. Utility Analysis
Dr. Dhiresh Kulshrestha
Associate Professor (Economics)

2. Utility By Consumer Behaviour
• The theory of Consumer behaviour describes:
How consumers buy different goods and services?
• Consumer behaviour also explains:
How a consumer allocates its income in relation to the purchase of different commodities?
and
How price affect his/her decision?

3. Consumer Choices
• Rational Behaviour
And
• Preference Behaviour

4. Consumer Choices
(Rational Behaviour)
• As we know money is scare. Due to this scarcity of money
consumers tend to be rational in their purchasing decision.
• A consumer would spend his money on the best possible place or
product that guarantees him utility or a sense of satisfaction.

5. 2
• The rational behavior of consumer also means that buyers only purchase
goods and services only when needed rather than wasting money on
things that have no immediate use as of now.

6. Preferences Behaviour
• Each consumer has preferences for certain of the goods and services
that are available in the market.
• Buyers also have a good idea of how much marginal utility they will get
from successive units of the various products they might purchase.

7. 2
• However, the amount of marginal & total utility that the people will get
will be different for every individual in the group because all individuals
have different taste and preferences.

8. Budget Constraint
• The consumer has a fixed, limited amount of money income.
• Every consumer faces a budget constraint
• There is infinite demand, but limited income
“ Wants are unlimited and Resources are limited”

9. Prices
• Goods are scarce because of the demand for them.
• Each consumers purchase is a part of the total demand in a market.
• However, since consumers have a limited income, they must choose the
most satisfying combination of goods based partially on prices.

10. Producer’s Theory
• For producers, a lower price is needed in order to induce a consumer to
buy more of their product.
“If prices are lower then demand will be high”