UNDERSTANDING CONSUMER BEHAVIOUR AND CONSUMPTION

Idisi P. O., Ogwu I. J., Agwu O. A.

Abstract: This paper is a review of consumer behaviour with respect to linear expenditure system, separable and additive utility functions, homogeneous and homothetic utility functions, direct and indirect utility functions and duality in consumption. Consumers of economic commodities are believed to be rational (always seeking to maximize utility and minimize cost). This theory of consumer behavior is useful in the analysis of utility optimization. The specific properties of utility functions are of interest to the economist. Linear expenditure systems are helpful in developing theories that are conformable to empirical modeling and estimation. Separable and additive utility functions emphasize that utility is derived from a group of commodities. Homothetic function is a monotonic transformation of a homogeneous function. The concept of’ ‘Duality’ enables analysis of direct and indirect utility functions based on convenience. We are able to derive the compensated demand function using the duality principle.

Keywords: Consumer behavior, linear expenditure, utility function, direct, indirect, duality, homogeneous, homothetic, separability, additivity

Title: UNDERSTANDING CONSUMER BEHAVIOUR AND CONSUMPTION

Author: Idisi P. O., Ogwu I. J., Agwu O. A.

International Journal of Management and Commerce Innovations 

ISSN 2348-7585 (Online)

Research Publish Journals

Vol. 6, Issue 2, October 2018 – March 2019

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UNDERSTANDING CONSUMER BEHAVIOUR AND CONSUMPTION by Idisi P. O., Ogwu I. J., Agwu O. A.