Utility in the context of "Consumer behaviour"

In economics, goods are anything that is good, usually in the sense that it provides welfare or utility to someone. Goods can be contrasted with bads, i.e. things that provide negative value for users, like chores or waste. A bad lowers a consumer's overall welfare.

Economics focuses on the study of economic goods, i.e. goods that are scarce; in other words, producing the good requires expending effort or resources. Economic goods contrast with free goods such as air, for which there is an unlimited supply.

In microeconomics, economic efficiency, depending on the context, is usually one of the following two related concepts:

• Allocative or Pareto efficiency: any changes made to assist one person would harm another.
• Productive efficiency: no additional output of one good can be obtained without decreasing the output of another good, and production proceeds at the lowest possible average total cost.

These definitions are not equivalent: a market or other economic system may be allocatively but not productively efficient, or productively but not allocatively efficient. There are also other definitions and measures. All characterizations of economic efficiency are encompassed by the more general engineering concept that a system is efficient or optimal when it maximizes desired outputs (such as utility) given available inputs.

Overconsumption describes a situation where consumers overuse their available goods and services to where they cannot, or do not want to, replenish or reuse them. In microeconomics, this is the point where the marginal cost of a consumer is greater than their marginal utility. The term overconsumption is quite controversial and does not necessarily have a single unifying definition. When used to refer to natural resources to the point where the environment is negatively affected, it is synonymous with the term overexploitation. However, when used in the broader economic sense, overconsumption can refer to all types of goods and services, including artificial ones, e.g., "the overconsumption of alcohol can lead to alcohol poisoning." Overconsumption is driven by several factors of the current global economy, including forces like consumerism, planned obsolescence, economic materialism, and other unsustainable business models, and can be contrasted with sustainable consumption.

Defining the amount of a natural resource required to be consumed for it to count as "overconsumption" is challenging because defining a sustainable capacity of the system requires accounting for many variables. A system's total capacity occurs at regional and worldwide levels, which means that specific regions may have higher consumption levels of certain resources than others due to greater resources without overconsuming a resource. A long-term pattern of overconsumption in any region or ecological system can cause a reduction in natural resources, often resulting in environmental degradation. However, this is only when applying the word to environmental impacts. When used in an economic sense, this point is defined as when the marginal cost of a consumer is equal to their marginal utility. Gossen's law of diminishing utility states that at this point, the consumer realizes the cost of consuming/purchasing another item/good is not worth the amount of utility (also known as happiness or satisfaction from the good) they had received, and therefore is not conducive to the consumer's wellbeing.

Goods are items that are usually (but not always) tangible, such as pens or pears. Services are activities provided by other people, such as teachers or barbers. Taken together, it is the production, distribution, and consumption of goods and services which underpins all economic activity and trade. According to economic theory, consumption of goods and services is assumed to provide utility (satisfaction) to the consumer or end-user, although businesses also consume goods and services in the course of producing their own.

In accounting, fair value is a rational and unbiased estimate of the potential market price of a good, service, or asset. The derivation takes into account such objective factors as the costs associated with production or replacement, market conditions and matters of supply and demand. Subjective factors may also be considered such as the risk characteristics, the cost of and return on capital, and individually perceived utility.

In microeconomic theory, the opportunity cost of a choice is the value of the best alternative forgone where, given limited resources, a choice needs to be made between several mutually exclusive alternatives. Assuming the best choice is made, it is the "cost" incurred by not enjoying the benefit that would have been had if the second best available choice had been taken instead. The New Oxford American Dictionary defines it as "the loss of potential gain from other alternatives when one alternative is chosen". As a representation of the relationship between scarcity and choice, the objective of opportunity cost is to ensure efficient use of scarce resources. It incorporates all associated costs of a decision, both explicit and implicit. Thus, opportunity costs are not restricted to monetary or financial costs: the real cost of output forgone, lost time, pleasure, or any other benefit that provides utility should also be considered an opportunity cost.

The theory of consumer choice is the branch of microeconomics that relates preferences to consumption expenditures and to consumer demand curves. It analyzes how consumers maximize the desirability of their consumption (as measured by their preferences subject to limitations on their expenditures), by maximizing utility subject to a consumer budget constraint.Factors influencing consumers' evaluation of the utility of goods include: income level, cultural factors, product information and physio-psychological factors.

Consumption is separated from production, logically, because two different economic agents are involved. In the first case, consumption is determined by the individual. Their specific tastes or preferences determine the amount of utility they derive from goods and services they consume. In the second case, a producer has different motives to the consumer in that they are focussed on the profit they make. This is explained further by producer theory. The models that make up consumer theory are used to represent prospectively observable demand patterns for an individual buyer on the hypothesis of constrained optimization. Prominent variables used to explain the rate at which the good is purchased (demanded) are the price per unit of that good, prices of related goods, and wealth of the consumer.