Consumer Sovereignty: Definition & Limitations

Lesson Transcript
Instructor: Brianna Whiting

Brianna has a masters of education in educational leadership, a DBA business management, and a BS in animal science.

Consumer sovereignty is the idea that demand dictates the production of goods and services. Learn how to define consumer sovereignty, explore its limitations, and review examples of how it works in the real world. Updated: 10/14/2021

What Is Consumer Sovereignty?

Try to imagine the last time you went to the grocery store. Whether you were looking to buy bread, soda or something else, chances are you had a lot of options to choose from. For example, if you were buying soda, you likely had an entire aisle of possibilities. You would have your choice of flavors and brands, and you could select from caffeinated or caffeine-free products. Let's say you decided to buy Diet Coke; in doing so, you practiced consumer sovereignty . You have indicated that you as the consumer prefer diet soda, in the flavor of Coca-Cola.

So, let's now look at a clear definition of what consumer sovereignty really is. Consumer sovereignty is the idea that consumers hold the power to influence production decisions, based on what goods and services they purchase. It is thought that consumer preference will influence what firms decide to produce. When consumers prefer certain products and services, this results in a higher demand for those products and services. Because consumer markets revolve around consumer demand, firms look to see what consumers prefer and need in order to stay in business.

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Are There Limitations to Consumer Sovereignty?

You may be wondering if consumer sovereignty is the actual way that firms decide what products and services to produce. Well, maybe, but some believe that there are limitations to the practice of consumer sovereignty that come in the form of deceit. Let's look at some now.

Firms hire marketing experts to sell the products they want to sell using deceitful marketing practices. This may mean that if a marketing firm is good at what they do, they may persuade consumers to purchase products they really don't want or need, and therefore, it would inhibit the theory of consumer sovereignty that consumers dictate their own needs and wants.

Sometimes consumers are tricked to purchase products and services that they do not want because of lack of information. If a consumer does not have all of the needed information about a product, they may mistakenly purchase that product. While a demand for a product may convince firms to produce that product, if that demand comes at the expense of the consumer because they do not have enough information about the product, the success will be short-lived.

Examples of Consumer Sovereignty

Let's take a look at two different examples to see consumer sovereignty in action: one where consumer sovereignty is successful, and one where it shows limitations.

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