Consumer Behaviour in Microeconomics 

Microeconomics is the branch of economics that studies the behavior and decisions of individual units such as consumers, households, and firms. One of the most important topics in microeconomics is consumer behaviour, which focuses on how consumers make choices about what goods and services to buy. These choices depend on several factors such as the consumer’s income, the prices of goods, personal preferences, and the availability of substitutes.

At the heart of consumer behaviour is the concept of utility, which means the satisfaction or happiness a person gets from consuming goods and services. Consumers try to maximize their total satisfaction, or total utility, given their limited income. The law of diminishing marginal utility states that as a person consumes more units of the same good, the additional satisfaction from each extra unit, known as marginal utility, keeps decreasing. For example, the first slice of pizza may give a lot of satisfaction, but by the fourth or fifth slice, the enjoyment reduces.

Another important way to understand consumer choices is through indifference curve analysis. An indifference curve shows different combinations of two goods that give a consumer the same level of satisfaction. Consumers prefer to stay on higher indifference curves as they represent more satisfaction. However, their actual choice is limited by their income, which is represented by a budget line. The point where the budget line touches (or is tangent to) the highest possible indifference curve shows the consumer’s equilibrium, meaning the best possible combination of goods the consumer can buy for maximum satisfaction.

The law of demand is closely related to consumer behaviour. It states that when the price of a good decreases, people tend to buy more of it, and when the price increases, they buy less—assuming other factors remain constant. This happens because of two effects: the substitution effect (people switch to cheaper alternatives) and the income effect (a price drop increases the real buying power). The relationship between price and demand is shown in a demand curve, which usually slopes downward.

Another related concept is the elasticity of demand, which measures how sensitive consumers are to changes in price, income, or the price of other goods. If a small price change causes a large change in quantity demanded, the product is said to be elastic. On the other hand, if the demand changes very little with price, the product is inelastic. For example, luxury items usually have elastic demand, while essential goods like salt or medicine are inelastic.

Consumers often receive more satisfaction from a product than the price they actually pay. This extra benefit is called consumer surplus. It is the difference between what a consumer is willing to pay and what they actually pay. For example, if someone is willing to pay ₹100 for a movie ticket but buys it for ₹80, the consumer surplus is ₹20. This concept helps economists understand the benefits consumers get in a market economy.

Another modern theory is the revealed preference theory, which focuses on what consumers actually buy instead of what they say they prefer. It assumes that consumers make rational decisions and always choose the combination of goods that gives them the most satisfaction within their budget. Over time, economists can understand preferences by observing these choices.

There is also a basic difference in how utility is measured. In cardinal utility theory, utility is measured in numbers (like 10 utils, 20 utils), while in ordinal utility theory, the focus is only on ranking preferences (like preferring tea over coffee). Most modern economists prefer ordinal utility because satisfaction is hard to measure in exact numbers.

In conclusion, consumer behaviour is a key area in microeconomics that explains how individuals make choices about buying goods and services. It involves understanding utility, demand, income, prices, preferences, and other factors that influence decisions. These concepts not only help economists analyze markets but also help businesses understand consumer needs and plan better strategies.