Go Back   ManagementParadise.com Forums Resolve Your Query - Get Help and discuss Projects > Managerial Economics ( Eco )

Managerial Economics

Discuss Managerial Economics within the Managerial Economics ( Eco ) forums, part of the Resolve Your Query - Get Help and discuss Projects category; Originally Posted by cxfdffd Can anyone help me with the project. Indicate the inportance of the study of consumer behaviour ...



Thread Tools Display Modes
Re: Managerial Economics
Gaurav Mishra
winner@1 is on a distinguished road
Chief Executive Officer at The TeenMag
Management Paradise Newbie
Institute: Amity University
Status: Offline
Posts: 308
Join Date: Dec 2011
Re: Managerial Economics - January 6th, 2012

Originally Posted by cxfdffd View Post
Can anyone help me with the project.

Indicate the inportance of the study of consumer behaviour for businessmen. How is utility analysis helpful in studing consumer behaviour? Discuss. Also explain the "law of diminishing marginal utility".
see if this helps


A subset of consumer demand theory that analysis consumer behavior and market demand using total utility and marginal utility. The key principle of utility analysis is the law of diminishing marginal utility, which offers an explanation for the law of demand and the negative slope of the demand curve.

Utility analysis, a subset of consumer demand theory, provides insight into an understanding of market demand and forms a cornerstone of modern microeconomics. In particular, this analysis investigates consumer behavior, especially market purchases, is based on the satisfaction of wants and needs (that is, utility) generated from the consumption of a good.

Utility analysis is primarily taught in introductory courses. A more sophisticated version of consumer demand theory relies on the analysis of indifference curves and is more commonly found at the intermediate course level and above.
Utility and Satisfaction
The primary focus of utility analysis is on the satisfaction of wants and needs obtained by the consumption of goods. This is technically termed utility. The utility generated from consumption affects the decision to purchase and consume a good.

When used in the analysis of consumer behavior, utility assumes a very precise meaning, which differs from the everyday use of the term. In common use, the term utility means "useful." For example, a "utility" knife is one with many uses, something that is handy to have around. In baseball, a "utility" player can perform quite well at several different positions and is thus useful to have on the team. Moreover, a public "utility" is a company that supplies a useful product, such as electricity, natural gas, or trash collection.

In contrast, the specific economic use of the term utility in the study of consumer behavior means the satisfaction of wants and needs obtained from the consumption of a commodity. The good consumed need not be "useful" in the everyday sense of the term. It only needs to provide satisfaction.

In other words, a frivolous good that has little or no practical use, can provide as much utility as a more useful good.

An OmniOpen Deluxe Can Opener is extremely useful, especially when a sealed can needs to be opened.

An autographed photo of Brace Brickhead, Medical Detective, is not very useful. It does nothing but rest peacefully in a picture frame.

Both items, however, provide utility. Both items satisfy wants and needs. The OmniOpen Deluxe Can Opener obviously makes it possible to open cans of food which satisfy the hunger need. The autographed photo of Brace Brickhead provides the owner with a warm, fuzzy feeling and a reminder of the time spent enjoying the thrilling exploits of Brace Brickhead, Medical Detective.
The Law of Demand
The primary focus of utility analysis is an understanding of market demand and the law of demand. The law of demand, which gives rise to a negatively-sloped demand curve, is an essential principle underlying market analysis. Modern microeconomic theory, among other topics, is concerned with understanding and explaining the law of demand.

The explanation of the law of demand using utility analysis is relatively simple. Consumers purchase goods that satisfy wants and needs, that is, generate utility. Those goods that generate more utility are more valuable to consumers and thus buyers are willing to pay a higher price. The key to the law of demand is that the utility generated declines as the quantity consumed increases. As such, the demand price that buyers are willing to pay decreases as the quantity demanded increases.

Total Utility
Utility analysis begins with the total utility derived from the consumption of different quantities of a good. Total utility is simply a measure of the total satisfaction of wants and needs obtained from the consumption or use of a good or service. It is often convenient to present total utility for a range of quantities in a table such as the one displayed to the right.

Utility analysis is based on the presumption that the amount of utility generated from the consumption of a good can be explicitly measured. The standard hypothetical measurement unit is "utils."

The Law of Diminishing Marginal Utility
A clear pattern is displayed by the marginal utility values in the far right column. Marginal utility decreases as Edgar takes more rides. This decreasing marginal utility reflects the law of diminishing marginal utility. The law of diminishing marginal utility states that marginal utility, or the extra utility obtained from consuming a good, decreases as the quantity consumed increases. In essence, each additional good consumed is less satisfying than the previous one. This law is particularly important for insight into market demand and the law of demand.

If each additional unit of a good is less satisfying, then a buyer is willing to pay less. As such, the demand price declines. This inverse law of demand relation between demand price and quantity demanded is a direct implication of the law of diminishing marginal utility.

have a positive attitude and work hard for success

To view links or images in signatures your post count must be 0 or greater. You currently have 0 posts.
Friends: (0)
Reply With Quote
Related to Managerial Economics

Similar Threads

Thread Thread Starter Forum Replies Last Post
Managerial Economics 1 & 2 Shreejith Managerial Economics ( Eco ) 66 December 14th, 2010 06:21 PM
managerial Economics sumi_adam Managerial Economics 6 December 1st, 2010 01:36 AM
managerial economics Ram Gopal PUBLISH / UPLOAD PROJECT OR DOWNLOAD REFERENCE PROJECT 0 May 11th, 2010 12:25 PM
Managerial Economics Henry Dapaah Managerial Economics ( Eco ) 0 April 5th, 2010 07:35 AM
Managerial Economics-ppt Suyam Pirakasam Managerial Economics ( Eco ) 17 December 8th, 2009 01:47 AM
Re: Managerial Economics
Strauss Jack
strauss is an unknown quantity at this point
Status: Offline
Posts: 4
Join Date: Jul 2012
Re: Managerial Economics - July 17th, 2012

Managerial Economics is used in macro economics management.Basically it is used in aggregate management and business decisions.All the economist must have to get expertise in this.
Friends: (0)
Reply With Quote
Re: Managerial Economics
Flexible Resources
ResourceManagement is an unknown quantity at this point
Status: Offline
Posts: 8
Join Date: Aug 2012
Re: Managerial Economics - August 28th, 2012

Managerial Economics as defined by Edwin Mansfield is "concerned with the application of economic concepts and economic analysis of the problems of drafting good administrative decision.
Friends: (0)
Reply With Quote


determent of demand, econometric, economics, macro economics, managerial, managerial economics, variable of demand

Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is On
Trackbacks are On
Pingbacks are On
Refbacks are Off

ManagementParadise.com is not responsible for the views and opinion of the posters. The posters and only posters shall be liable for any copyright infringement.