Applied Eco - Q4 - M10
Applied Eco - Q4 - M10
HIGH
Economics SCHOOL
Self-Learning
Module
Socioeconomic Factors Affecting
Business and Industry: 10
Consumer Behavior
662
Quarter 4
Applied Economics
Quarter 4 – Self-Learning Module 10: Socioeconomic Factors Affecting Business
and Industry: Consumer Behavior
First Edition, 2020
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Economics
SCHOOL
Self-Learning
Module
10
Quarter 4
Welcome to the Senior High School – Applied Economics Self Learning Module
on Socioeconomic Factors Affecting Business and Industry: Consumer Behavior!
This learning material hopes to engage the learners in guided and independent
learning activities at their own pace and time. Further, this also aims to help learners
acquire the needed 21st century skills especially the 5 Cs, namely: Communication,
Collaboration, Creativity, Critical Thinking, and Character while taking into
consideration their needs and circumstances.
In addition to the material in the main text, you will also see this box in the
body of the module:
As a facilitator you are expected to orient the learners on how to use this
module. You also need to keep track of the learners' progress while allowing them to
manage their own learning. Moreover, you are expected to encourage and assist the
learners as they do the tasks included in the module.
For the learner:
This module was designed to provide you with fun and meaningful
opportunities for guided and independent learning at your own pace and time. You
will be enabled to process the contents of the learning material while being an active
learner.
Posttest - This measures how much you have learned from the
entire module.
EXPECTATIONS
PRETEST
Directions: Choose the letter of the best answer and write it on a separate sheet of
paper.
RECAP
2. Go Negosyo Act
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LESSON
Consumer Theory
Consumer theory is the study of how people decide to spend their money
based on their individual preferences, and budget constraints. Consumer theory
shows how individuals make choices, subject to how much available income they
have to spend, and the prices of products. Consumption refers to the use of goods
and services to satisfy human wants.
2. Nonsatiation - People are seldom satisfied with one trip to the shops and
always want to consume more.
A consumer aims to maximize the satisfaction he/she derives from the use of
a good or service. The utility is a term in economics that refers to the total satisfaction
received from consuming a good or service. Economic theories based on rational
choice usually assume that consumers will strive to maximize their utility. The
economic utility of a good or service is important to understand, because it directly
influences the demand, and therefore price, of that good or service. In practice, a
consumer's utility is impossible to measure and quantify. In order easily understand
the concept of utility, we shall assume that it is measurable in units, which is called
util. Util is one unit of satisfaction.
The utility function shows the relationship between utility and consumption.
In the equation form, it is U = f(C), which is simply stated as: utility is a function of
consumption. Also, the utility for the consumption of goods X and Y can be expressed
as U = f(X,Y). The important measures of utility are Total Utility and Marginal Utility.
Total Utility refers to the combined utility derived from consuming an
additional unit of a good. Marginal Utility refers to the additional utility derived from
consuming an additional unit of a good.
The law is based upon the fact that the total wants of humans are virtually
unlimited, each single want is satiable. Therefore, as an individual consumes more
and more units of goods, the intensity of his want for that goods declines, to the point
that he no longer wants to consume more goods. When the saturation point is
reached, the marginal utility of goods becomes zero. The zero marginal utility of goods
implies that the individual has reached his/her satisfaction.
Table 1. Hypothetical Utility Schedule for Milk tea
Cups of Milk Tea
Consumption per day Total Utility Marginal utility
1 12 12
2 22 10
3 30 8
4 36 6
5 40 4
6 41 1
7 39 -2
8 34 -5
Consider Table 1 in which we have presented the total and marginal utilities
derived by a person who consumes milk tea per day. When one cup of milk tea is
taken per day, the total utility derived is 12 units. And because this is the first cup
its marginal utility is also 12 utils. With the consumption of 2nd cup per day, the
total utility rises to 22 but the marginal utility falls to 10 utils. It will be seen from
the table that as the consumption of milk tea increases to six cups per day, the
marginal utility from the additional cups diminishes (the total utility is increasing at
a diminishing rate).
However, when the cups of tea consumed per day increased to 7, then instead
of giving positive marginal utility, the 7th cup gives negative marginal utility which
is equal to -2. Too many cups of milk tea consumed per day (say more than six for
an individual) can cause acidity and gas trouble. Thus, the extra cups of milk tea
beyond 6 cups to a person gives him disutility, instead of positive satisfaction.
The figure represents the data
taken from the above table. We have to
put the utility on the y-axis and the
number of cups of milk tea consumed
per day are on the x-axis. As the figure
shows, the curve increases up to the
6th cup of milk tea, and beyond that
the curve declines. This indicates that
the utility reaches its maximum
satisfaction up to 6th cups, and beyond
that, the marginal satisfaction
declines.
ACTIVITIES
Activity 1: My Utility!
Directions: Explain and graph the utility schedule below. Use the space below for
your answer.
1. _______________________________________________________________________________.
2. _______________________________________________________________________________.
3. _______________________________________________________________________________.
4. ______________________________________________________________________________.
5. ______________________________________________________________________________.
WRAP-UP
To summarize what you have learned in the lesson, answer the following
questions:
1. What is consumer theory?
2. What are the factors affecting business and industry in terms of consumers?
3. What is the importance of consumer behavior in business?
VALUING
Reflect on this!
“Satisfaction is not always the fulfillment of what you want; it is the realization of
how blessed you are for what you have.”
― Anonymous
POSTTEST
____________1. The law of diminishing marginal utility means that the total utility
increases but at a decreasing rate.
____________2. Total Utility is defined as the sum of the satisfaction that a person
can receive from the consumption of all units of a specific product.
____________3. Consumers lose satisfaction in a product the more they consume it.
____________4. People are seldom satisfied with one trip to the shops and always want
to consume more.
____________5. Utility function shows how individuals make choices, subject to how
much income they have available to spend, and the prices of goods
and services.
KEY TO CORRECTION
5. C 5. F
4. A 4. T
3. D 3. T
2. A 2. T
1. B 1. T
PRETEST POSTTEST:
References
About Bharath Recent Posts About Bharath Bharath Sivakumar Started out to Become
a Developer but Felt at Home Expressing Myself via Writing. The Journey Started
from a Single Novel. Been a Writer since Schooling Days. Interested in Coding,
About Bharath, Recent Posts, and Bharath Sivakumar. "Customer Vs. Consumer
- Relationship & Difference." Feedough. August 14, 2020. Accessed August 18,
2020. https://www.feedough.com/customer-vs-consumer-
difference/#:~:text=Basically, a customer is the,buying makes him a customer.
Chappelow, Jim. "Utility Definition." Investopedia. January 30, 2020. Accessed August
18, 2020. https://www.investopedia.com/terms/u/utility.asp.
Dinio, R. and Villalis, G. Applied Economics. Rex Book Store, Inc. Sampaloc,
Manila, 2017.
"Law of Diminishing Marginal Utility (Explained With Diagram)." Your Article Library.
May 02, 2014. Accessed August 18, 2020.
https://www.yourarticlelibrary.com/economics/law-of-diminishing-marginal-
utility-explained-with-diagram/38940#:~:text=According to the Law of,the good
goes on falling.
"Quotes about Satisfaction." Quotes about Satisfaction (538 Quotes). Accessed August
18, 2020. https://www.quotemaster.org/Satisfaction.