The
companies with high profit margin products must have done research on how
discount offers affect people's consumption decisions. We all have some
experience of consuming some products because their offers are too nice to be
rejected, even sometimes we do not necessarily need them. Being informed about
the discount offers is important. When we are informed about the pre-discounted
price, we may raise our expected value of one good and decide to consume it.
However, if we are offered a discount but not informed, we are less likely to
consume the good as our expected value does not change. Moreover, when we are
making individual consumption decisions, we do not usually consider about the
budget constraint. We do care about prices, but make individual consumption
decision based on if the price matches the utility the good gives us.
Therefore, when we think about individual consumption decision, it is not a
question of utility constrained by budget, instead it is a question that
whether the price could match the utility the good provides . From logic, budget
is determined by income, then budget will then be split into small parts of
individual expenditures, we decide our consumption based upon these small
parts. However, in reality, we have a big image of our budget, but we make
individual consumptions relatively independent of the budget, unless the
consumption requires a significant portion of the total budget. To conclude,
when people's incomes increase, their consumption decisions made might become
more independent from their budgets, and vice versa.
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