Rational consumer meaning

Imagine this: a guy is sitting alone on his couch, watching silly videos on a free streaming site, when all of a sudden his show is interrupted by a video of a mouthwatering Quarter Pounder burger from McDonald’s. He sees the juicy patty and the melted cheese and gets so enticed he clicks on the Buy Now button. His order arrives in a few minutes and he immediately dives into the paper bag. He doesn’t really feel hungry at all, dinner is supposed to be in three hours, but he takes a big bite and thinks, “yes, that’s exactly how I imagined it!” He doesn’t necessarily need to eat right now, but he went ahead and purchased anyway. That is an example of an emotional purchase. But big brands are not the only ones who can tap into a buyer’s subconscious motivation to convince them to purchase. You can do that, too. Let’s discuss how. First, you must understand that instincts do not equate to needs. Rather, instincts push humans to have a need. For instance, shivering due to the cold weather is instinct, which gives the person the need to feel warm, and therefore a motivation to purchase clothing. In a previous article, we discussed how an offer’s benefits matter more to the consumer than features. The main driving force behind this theory is that people’s purchase decisions mostly rely on emotions. How can a product help me? How can I improve my life? How can I cure my feeling of being left out? These are just some of the questions that we unconsciously go through when deciding t...

Chevron icon It indicates an expandable section or menu, or sometimes previous / next navigation options. Chevron icon It indicates an expandable section or menu, or sometimes previous / next navigation options. Chevron icon It indicates an expandable section or menu, or sometimes previous / next navigation options. Rational choice theory: A school of thought that predicts economic and social behaviors • Rational choice theory is a framework that states that individuals behave according to their own self-interests. • Adam Smith created the foundation of this theory using a metaphor known as the 'invisible hand.' • It assumes there are 'rational actors' and doesn't account for cultural nuance, emotions, or unconscious behavior. By clicking ‘Sign up’, you agree to receive marketing emails from Insider as well as other partner offers and accept our Every day, you make many decisions that affect your life and finances. Rational choice theory proposes that individuals work as 'rational actors' and base decisions on what makes the most sense economically and for their personal interests. This theory is also sometimes referred to as choice theory or rational action theory and helps predict certain behavioral outcomes. What is rational choice theory? Rational choice theory is a framework used in economics and other fields of study that proposes that individuals make decisions that are based on maximizing their own benefits. The theory suggests that people perform a cost-benefit an...

In other words, a rational consumer is one who uses reason in his spending decisions. Thus, it takes into account all the pros and cons of the good or service to be acquired. This type of consumer is the opposite of the impulsive one, which is one who is carried away by emotions when making a purchase. As we will explain in the next section, the rational consumer evaluates different factors. What influences the rational consumer? The main variables that the rational consumer takes into account are the following: • The price of the product is one of the main factors to take into account when making a purchase, especially if there may be substitute goods at an equal or lower price. • The quality of the merchandise, because if the product offers the guarantee of better satisfying the need in question, the consumer could be willing to pay a price above the market average. • The budget constraint, that is, the money the buyer has to spend. This, together with the price, determines the economic limitations of the individual to acquire a particular product. • The relevance of the purchase, that is, whether or not it is appropriate to make the acquisition, regardless of whether it is possible or not based on personal finances. At this point, the question is key: Do I want it or do I need it? The answer would be the first, for example, if the person already has the need in question covered, but still feels the desire to buy the product that satisfies them. Let’s imagine that the in...

Consumption theory The rational optimization framework In their studies of Within the rational optimization framework, there are two main approaches. The “ Utility Analysis and the Consumption Function” (1954) by economists Richard Brumberg, proposes that households’ spending decisions are driven by household members’ Macroeconomists tend to use a simplified version of the optimization framework called the “ Perhaps the most important feature of the consumption function for The modern mathematical versions of the life-cycle and permanent-income-hypothesis models used by most economists bring some plausible refinements to the original ideas. For example, the modern models imply that the marginal Modifications to the standard framework In The Wealth of Nations (1776), Scottish economist A linen shirt…is, strictly speaking, not a necessary of life. The Greeks and Romans lived, I suppose, very comfortably though they had no linen. But in the present times, through the greater part of Europe, a creditable day-labourer would be ashamed to appear in public without a linen shirt, the want of which would be supposed to denote [a] disgraceful degree of Smith clearly did not believe one of the baseline assumptions built into the standard models of consumption described above: that the pleasure yielded by a given level of consumption is independent of the consumption standards of the surrounding If, however, the pleasure yielded by an individual’s current consumption depends partly on...

political science: Theory of rational choice Elements and structure In rational choice theory, agents are described by their unchanging sets of preferences over all conceivable global outcomes. Agents are said to be rational if their preferences are complete—that is, if they reflect a relationship of superiority, inferiority, or indifference among all pairs of choices—and are logically ordered—that is, they do not exhibit any cyclic inconsistencies. In addition, for choices in which the probabilities of outcomes are either risky or uncertain, rational agents exhibit consistencies among their choices much as one would expect from an The consistency relations among preferences over outcomes are stated in mathematical axioms; a rational agent is one whose choices reflect internal consistency demanded by the axioms of rational choice. Rational choice theory holds that all considerations pertinent to choice (that may include attitudes toward risk, resentment, sympathy, envy, loyalty, love, and a sense of fairness) can be incorporated into agents’ preference rankings over all possible end states. Social scientists have only indirect access to agents’ desires through their revealed choices. Therefore, researchers infer back from observed behaviour to reconstruct the preference Rational choice theory is a fundamental element of For social scientists using game theory to model, explain, and predict Get a Britannica Premium subscription and gain access to exclusive content. A perple...

Which of the following assumption is NOT applicable for the law of diminishing marginal utility? (i) All the units of the given commodity are heterogeneous. (ii) The units of consumption are of unreasonable size. (iii) The consumer is rational human being and he aims at minimization of satisfaction.

Back 6 Ways Your Customers Behave Irrationally & What You Can Learn From It According to behavioural economics, we’re all irrational consumers, making poor decisions that make no sense. Understanding the motivation behind how your customers will behave predictably irrationally could give your business a competitive edge. Here at Proposify, we spend a lot of time trying to understand why our customers do the things they do, why they make certain decisions, what motivates them. But the answers aren’t always straightforward, predictable, or even rational. At least from our perspective. We’re often surprised by the choices our customers make when purchasing certain subscription plans, how they interact with the software, why they decide to choose us over the competition, and why they sometimes decide to leave us for the competition. We learn from testing, measuring, and experience but we still sometimes make assumptions, assumptions we think are based on rational thought, but those assumptions end up being way off. Because as it turns out, humans can be pretty irrational. Even you. Most definitely me. Recently I watched an interesting documentary on Netflix called (Dis)Honesty: The Truth About Lies, based on the research of The film explores why people lie, how they justify it, how common lying is (even among ‘good’ people), and the social and economic impacts of lying. During the film Ariely talks about the irrationality of human behaviour, which is what usually leads people ...

Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Adam received his master's in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem. • Rational behavior refers to a decision-making process that is based on making choices that result in an optimal level of benefit or utility. • Rational choice theory is an economic theory that assumes rational behavior on the part of individuals. • Rational behavior may not involve receiving the most monetary or material benefit, because the satisfaction received could be purely emotional or non-monetary. Understanding Rational Behavior Rational behavior is the cornerstone of rational choice theory, a theory of economics that assumes that individuals always make decisions that provide them with the highest amount of personal utility. These decisions provide people with the greatest benefit or satisfaction given the choices available. Rational behavior may not involve receiving the most monetary or material benefit, because the satisfaction received could be purely emotional or non-monetary. For example, while ...

• Microeconomics • Economic Principles • Consumer Rationality Consumer Rationality Imagine you go shopping for new shoes. How do you decide what to buy? Would you make the decision solely based on the price? Or perhaps based on the style or quality of the shoes? The decision wouldn’t be the same if you were looking for shoes for a special occasion or for everyday trainers, right? A shoe shop, Pixabay. Do you… Consumer Rationality • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • Imagine you go shopping for new shoes. How do you decide what to buy? Would you make the decision solely based on the price? Or perhaps based on the style or quality of the shoes? The decision wouldn’t be the same if you were looking for shoes for a special occasion or for everyday trainers, right? A shoe shop, Pixabay. Do you believe that as a consumer you are always making rational choices? The answer is simple: it may be impossible for us to always act rationally. T...

Which of the following assumption is NOT applicable for the law of diminishing marginal utility? (i) All the units of the given commodity are heterogeneous. (ii) The units of consumption are of unreasonable size. (iii) The consumer is rational human being and he aims at minimization of satisfaction.