Theory of Consumer Behavior

The notion of diminishing marginal utility, and, thus, the size of the consumers' surplus, rests upon an assumption that, as much as a point, demand for a good will increase, as the cost with the good decreases.

While utility maximization and diminishing marginal utility can explain the sale of lottery tickets in the context with the little size with the outlay and also the big size from the capacity return, it can't explain efficiently the sale of lottery tickets when both the outlay as well as the capacity return are small (Forrest, Simmons, & Chesters, 2002). Forrest, Simmons, and Chesters (2002) contend that the behavioral theory of customer behavior provide an option explanation. They contend additional that lottery sales aren't driven solely by the capacity of maximize utility via a large payout, but rather also are driven by reasons including the fun of winning even tiny amounts.

Accounting profit refers to the normal bottom-line characterization of earnings, it that accounting profit reflects the difference among revenues collected from an endeavor and costs expended in creating the merchandise associated from the revenues. Unlike the accounting profit concept, the economic profit concept enters an additional cost input into the equation.

The much more input towards the equation is opportunity cost. Opportunity prices considers (a) the selection uses that to which the producer may have used the resources applied from the production process and (b) the benefits (gains) that could were obtained via this kind of selection uses. Thus, if a low-risk investment in the resources applied within the production program could deliver the exact same rewards like a greater risk production and marketing process, the relevant discount rate may perhaps result in the alternative process to become preferable. Economic profit is a measure of the efficient use of resources. The economic profit concept requires a consideration with the costs a single incurs in pursuing 1 method if favor of an option method related to resource use.

Economies of scale enable a corporation being big and stay large.? The focus is over a production of the single item or product or service group in big volumes that lowers the prices of production and makes the items additional price competitive inside market. Economies of scale refer to efficiencies derived from large-scale production, whilst economies of scope refer to efficiencies derived inside the production of several goods.

Traditional economies of scale and their attendant advantages are becoming replaced in several organizations by economies of scope, where details technology enables the business to reach customers, suppliers, as well as other points of an organization's external environment.

 

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