Who Is the Consumer in Microeconomics?

Who Is the Consumer in Microeconomics?
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  • 0:01 Definition of Consumer
  • 1:30 Microeconomic Assumptions
  • 2:42 Lesson Summary
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Lesson Transcript
Instructor: Jennifer Lombardo
Who is the consumer in microeconomics? In this lesson, you will learn the definition of a consumer and the microeconomic assumption that explains their decision-making process.

Definition of Consumer

For many years, consumers were treated as passive players in the economic marketplace. Inferior, unsafe, or unwanted products were pushed into the marketplace by companies. In this lesson, you will learn about consumers and the assumption economists make about them.

A consumer is considered a person, group of people, or organizations that are the final users of a product or service. Consumers were taken advantage of by corporations and did not have much of a say regarding the marketplace. In recent years, consumers have been able to take a more active part in the marketplace by demanding higher quality, innovative, and well-priced products. In addition, governments have reacted by passing consumer protection laws that have empowered consumers to demand ethical and fair treatment from companies. The reason that understanding the consumer and their decision-making process is important in microeconomics is that over 70 percent of the economy is made up of consumer spending.

Microeconomics deals with understanding individual consumer decision-making and how it affects businesses. Economists and businesses find it necessary to understand what consumers are doing with their money (whether saving, investing, or spending) in order to make business and market decisions. For example, Sword Cars likes to understand when, how, and why their consumers purchase automobiles in order to help plan production and provide a competitive price. There are some basic microeconomic assumptions that help explain consumers' purchasing behavior.

Microeconomic Assumptions

The microeconomic assumption that exists can help companies understand the methodology of consumer purchase decision-making. The assumption is that consumers do not have an unlimited budget, so their available cash is spent to achieve the largest personal benefit within their financial limit.

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