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Economic Model
The Economic Model of consumer behavior proposes that consumers seek maximum value by comparing prices and quality.
It assumes consumers have a fixed income, always make informed decisions with complete product knowledge, and maintain consistent preferences.
But, this model rarely captures the complexity of consumer behavior.
For instance, during the holiday season, the cost of toys or gifts may exceed a buyer's resources, leading them to resort to options like credit cards or personal loans. In such cases, the primary driver becomes the need rather than adhering strictly to economic principles.
The Economic Model often overlooks impulse buying, limited product knowledge, changing preferences, urgent needs, and alternative financing methods influencing purchasing decisions.
Despite its constraints, the Economic Model provides a foundational framework to predict how consumers respond to changes in price and product features.
It benefits businesses, as it helps anticipate sales by considering customer income and product prices, assuming that marketing the lowest-priced product would ensure consistent profits.
Economic Model
The Economic Model of Consumer Behavior centers on rational decision-making driven by utility maximization within budget constraints. It assumes that consumers aim to allocate their income efficiently to derive the greatest satisfaction or utility from goods and services.
This model incorporates concepts such as marginal utility, where consumers weigh the additional satisfaction gained from each product unit against its price. Factors like income, prices, and individual preferences influence choices, and consumers make rational decisions to optimize their well-being.
Marketers respond by adjusting prices, emphasizing value propositions, and understanding the economic factors that impact consumers' purchasing power. While influential, the economic model is critiqued for oversimplifying human behavior and neglecting psychological and social dimensions. Despite these criticisms, it remains a fundamental framework for understanding how economic factors shape consumer choices in the marketplace.