ALLAMA IQBAL OPEN UNIVERSITY

Assignment :2
Student Name:Ayesha Khaild.

Student ID:0000254401.
Q.1 What is scale of preferences? What are the application
and uses of indifference curve technique?

An indifference curve is a chart showing numerous combinations of goods

or commodities that depart the patron equally well off or similarly happy—for this reason
indifferent—on the subject of having any combination between the two objects this is shown
along the curve.

For example, if you want each warm dogs and hamburgers, you will be detached to shopping
for either 20 warm puppies and no hamburgers, forty five hamburgers and no warm dogs, or
some combination of the 2—for instance, 14 warm dogs and 20 hamburgers (see point “A” in
the chart under). Either aggregate presents the same utility.

An indifference curve shows a combination of items in various portions that gives identical
pleasure (software) to an man or woman.

It is used in economics to explain the factor wherein people have no specific preference for
both one appropriate or some other based on their relative portions.

Along the curve, a consumer hence has an equal desire for the diverse combos of products
proven.Typically, indifference curves are proven convex to the foundation, and no
indifference curves ever intersect.

Understanding Indifference Curves

Standard indifference curve evaluation operates using a easy two-dimensional chart. Each axis
represents one sort of financial excellent. Along the indifference curve, the patron is
indifferent among any of the combinations of goods represented by points at the curve
because the mixture of products on an indifference curve offers the same degree of software
to the customer.

For example, a younger boy is probably indifferent between possessing two comic books and
one toy truck, or four toy vehicles and one comedian book, so each of those mixtures would
be factors on an indifference curve of the young boy.

Indifference curves are heuristic gadgets utilized in modern microeconomics to illustrate client

choice and the limitations of a budget. Economists have adopted the ideas of indifference
curves inside the examine of welfare economics.

Indifference is conceptually incompatible with actual-lifestyles financial movement. Every

motion that human beings take indicates a desire, no longer indifference. Furthermore,
humans’s relative options had been found to exchange over time and depending on their
social context.

Indifference Curve Analysis

Indifference curves function beneath many assumptions; as an example, each indifference

curve is generally convex to the starting place, and no two indifference curves ever intersect.
Consumers are constantly assumed to be extra satisfied when attaining bundles of products on
indifference curves which might be farther from the origin.

As income will increase, an character will normally shift their consumption level due to the
fact they could afford greater commodities, with the result that they'll emerge as on an
indifference curve this is farther from the foundation—for this reason higher off.

Many center standards of microeconomics appear in indifference curve evaluation, which

include man or woman preference, marginal software idea, earnings, substitution results,
and the subjective concept of cost. Indifference curve analysis emphasizes marginal prices of
substitution (MRS) and possibility expenses. Indifference curve analysis usually assumes that
each one other variables are steady or stable.

Most monetary textbooks build upon indifference curves to introduce the foremost choice
of products for any purchaser based totally on that consumer’s earnings. Classic analysis
shows that the surest intake package takes region on the factor wherein a patron’s
indifference curve is tangent with their budget constraint.

The slope of the indifference curve is referred to as the marginal fee of substitution (MRS).
The MRS is the price at which the consumer is willing to give up one correct for every
other. For example, a patron who values apples might be slower to offer them up for
oranges, and the slope will replicate this rate of substitution.

Criticisms and Complications of the Indifference Curve

Indifference curves, like many aspects of cutting-edge economics, had been criticized for
oversimplifying or making unrealistic assumptions about human conduct.2 For instance,
purchaser choices might alternate among two exceptional points in time, rendering unique
indifference curves almost vain. Other critics notice that it's far theoretically feasible to have
concave indifference curves or maybe round curves that are either convex or concave to the
starting place at diverse points.

What does an indifference curve provide an explanation for?

An indifference curve is utilized by economists to provide an explanation for the tradeoffs

that human beings don't forget after they come across goods that they desire to shop for.
Because human beings are confined by means of a restricted budget, they can't purchase
the entirety. Instead, a value-advantage analysis must be considered. Indifference curves
 visually depict this tradeoff by displaying which portions of two items provide the equal
software to a purchaser (i.E., where they stay indifferent).

What is the components for an indifference curve?

 The formulation utilized in economics for building an indifference curve is:

𝑈(𝑡, 𝑦)=𝑐

in which:c stands for the software stage done on the curve and is consistent.

t and y are the quantities of distinct items, t and y.

Different values of c correspond to exceptional indifference curves, so if we boom our

expected application, we reap a brand new indifference curve that is plotted above and to
the proper of the preceding one.

Q.2 State and explain the law of diminishing return whit the
help of assumption schedule and diagram.

The law of diminishing returns states that an additional amount of a single factor of production
will result in a decreasing marginal output of production. The law assumes other factors to be
constant. It means that if X produces Y, there will be a point when adding more quantities of X
will not help in a marginal increase in quantities of Y.
In the above graph of the law of diminishing returns, as factor X rises from 1 unit to 2 units, the
number of Y increases. But as X quantities rise further to P, production assumes a decreasing
rate till Yp. This describes the law above. Another noticeable aspect is that there comes a point
when a further increase in units of X will only reduce the production of Y. Thus, not only does
increasing input affect marginal product but also the total product.  This law is mostly
applicable in a production setting.
1. The Factor of Production – Any input that generates a desired quantity of output.
Concerning the law of diminishing returns, only one factor at a time is considered.

2. Marginal Product – With every additional input, the increase in the total product is
referred to as the marginal product. In the graph above, Y 2-Y1 is the marginal product.

3. Total Product – When an input is applied through a process, the total product is the
result or outcome as an aggregate measure.

Assumptions of Law of Diminishing Marginal Returns

 The law is used mostly by considering a short-run production scenario. That is because
the principle lies in keeping all other factors of production constant, except the one
used to correlate with output. It is not possible in a long-run view of production.
  The input and the process(es) should be held independent of technological aspects as
technology can play its part in improving production efficiencies.

Examples of Law of Diminishing Marginal Returns

Below are examples of the law of diminishing returns.
Example #1
Suppose that a factory produces a certain good given by the following equation:
Q = -L3 + 27L2 + 15L
Where,
Q is the quantity of production
L is the input in terms of labor
Describe if the law of diminishing returns applies. If yes, how?
Solution:
To check the applicability of this law, we will quantify units of production by assuming
different values of labor input.
We have plotted the values of Q and L on a graph for analysis. The Y-axis represents the
product (total and marginal). The X-axis represents units of labor.
In the above law of  diminishing return graph, two points are critical to the law:
 Point A – the limiting marginal product, and

 Point B – the limiting total product.

The following points are worth noting:

We can divide this production graph into two stages concerning the marginal output.
1. As labor input increases, the marginal product also increases before the number of
workers, L = 9. It is the stage of growing returns.

2. The marginal product produced by the 11th unit of labor is less than the 10th. It begins
the stage of diminishing returns.

The total product, i.e., Q’s quantity, does not decrease before the 20th worker is employed. The
marginal product enters the stage of negative returns from here.
The factory can employ 9 workers to keep the marginal product at a rising rate. However, it can
add as many as 19 workers before noting a fall in the total product.

Q.3 State and explain the law of variables proportions with

the help of schedule and diagram.
Law of Variable Proportions occupies an important place in economic theory. This law is also
known as Law of Proportionality.

Keeping other factors fixed, the law explains the production function with one factor variable.
In the short run when output of a commodity is sought to be increased, the law of variable
proportions comes into operation.

Therefore, when the number of one factor is increased or decreased, while other factors are
constant, the proportion between the factors is altered. For instance, there are two factors of
production viz., land and labour.
Land is a fixed factor whereas labour is a variable factor. Now, suppose we have a land
measuring 5 hectares. We grow wheat on it with the help of variable factor i.e., labour.
Accordingly, the proportion between land and labour will be 1: 5. If the number of laborers is
increased to 2, the new proportion between labour and land will be 2: 5. Due to change in the
proportion of factors there will also emerge a change in total output at different rates. This
tendency in the theory of production called the Law of Variable Proportion.
Definitions:
“As the proportion of the factor in a combination of factors is increased after a point, first the
marginal and then the average product of that factor will diminish.” Benham
“An increase in some inputs relative to other fixed inputs will in a given state of technology
cause output to increase, but after a point the extra output resulting from the same additions of
extra inputs will become less and less.” Samuelson
“The law of variable proportion states that if the inputs of one resource is increased by equal
increment per unit of time while the inputs of other resources are held constant, total output will
increase, but beyond some point the resulting output increases will become smaller and
smaller.” Leftwitch
Assumptions:
Law of variable proportions is based on following assumptions:
(i) Constant Technology:
The state of technology is assumed to be given and constant. If there is an improvement in
technology the production function will move upward.
(ii) Factor Proportions are Variable:
The law assumes that factor proportions are variable. If factors of production are to be
combined in a fixed proportion, the law has no validity.
(iii) Homogeneous Factor Units:
The units of variable factor are homogeneous. Each unit is identical in quality and amount with
every other unit.
(iv) Short-Run:
The law operates in the short-run when it is not possible to vary all factor inputs.
Explanation of the Law:
In order to understand the law of variable proportions we take the example of agriculture.
Suppose land and labour are the only two factors of production.
By keeping land as a fixed factor, the production of variable factor i.e., labour can be
shown with the help of the following table:

From the table 1 it is clear that there are three stages of the law of variable proportion. In the
first stage average production increases as there are more and more doses of labour and capital
employed with fixed factors (land). We see that total product, average product, and marginal
product increases but average product and marginal product increases up to 40 units. Later on,
both start decreasing because proportion of workers to land was sufficient and land is not
properly used. This is the end of the first stage.
The second stage starts from where the first stage ends or where AP=MP. In this stage, average
product and marginal product start falling. We should note that marginal product falls at a faster
rate than the average product. Here, total product increases at a diminishing rate. It is also
maximum at 70 units of labour where marginal product becomes zero while average product is
never zero or negative.
The third stage begins where second stage ends. This starts from 8th unit. Here, marginal
product is negative and total product falls but average product is still positive. At this stage, any
additional dose leads to positive nuisance because additional dose leads to negative marginal
product.
Graphic Presentation:
In fig. 1, on OX axis, we have measured number of labourers while quantity of product is
shown on OY axis. TP is total product curve. Up to point ‘E’, total product is increasing at
increasing rate. Between points E and G it is increasing at the decreasing rate. Here marginal
product has started falling. At point ‘G’ i.e., when 7 units of labourers are employed, total
product is maximum while, marginal product is zero. Thereafter, it begins to diminish
corresponding to negative marginal product. In the lower part of the figure MP is marginal
product curve.
Up to point ‘H’ marginal product increases. At point ‘H’, i.e., when 3 units of labourers are
employed, it is maximum. After that, marginal product begins to decrease. Before point ‘I’
marginal product becomes zero at point C and it turns negative. AP curve represents average
product. Before point ‘I’, average product is less than marginal product. At point ‘I’ average
product is maximum. Up to point T, average product increases but after that it starts to
diminish.
Three Stages of the Law:
1. First Stage:
First stage starts from point ‘O’ and ends up to point F. At point F average product is maximum
and is equal to marginal product. In this stage, total product increases initially at increasing rate
up to point E. between ‘E’ and ‘F’ it increases at diminishing rate. Similarly marginal product
also increases initially and reaches its maximum at point ‘H’. Later on, it begins to diminish and
becomes equal to average product at point T. In this stage, marginal product exceeds average
product (MP > AP).
2. Second Stage:
It begins from the point F. In this stage, total product increases at diminishing rate and is at its
maximum at point ‘G’ correspondingly marginal product diminishes rapidly and becomes
‘zero’ at point ‘C’. Average product is maximum at point ‘I’ and thereafter it begins to
decrease. In this stage, marginal product is less than average product (MP < AP).
3. Third Stage:
This stage begins beyond point ‘G’. Here total product starts diminishing. Average product also
declines. Marginal product turns negative. Law of diminishing returns firmly manifests itself. In
this stage, no firm will produce anything. This happens because marginal product of the labour
becomes negative. The employer will suffer losses by employing more units of labourers.
However, of the three stages, a firm will like to produce up to any given point in the second
stage only.
ADVERTISEMENTS:

In Which Stage Rational Decision is Possible:

To make the things simple, let us suppose that, a is variable factor and b is the fixed factor. And
a1, a2 , a3….are units of a and b1 b2b3…… are unit of b.
Stage I is characterized by increasing AP, so that the total product must also be increasing. This
means that the efficiency of the variable factor of production is increasing i.e., output per unit of
a is increasing. The efficiency of b, the fixed factor, is also increasing, since the total product
with b1 is increasing.
The stage II is characterized by decreasing AP and a decreasing MP, but with MP not negative.
Thus, the efficiency of the variable factor is falling, while the efficiency of b, the fixed factor, is
increasing, since the TP with b1 continues to increase.
Finally, stage III is characterized by falling AP and MP, and further by negative MP. Thus, the
efficiency of both the fixed and variable factor is decreasing.
Rational Decision:
Stage II becomes the relevant and important stage of production. Production will not take place
in either of the other two stages. It means production will not take place in stage III and stage I.
Thus, a rational producer will operate in stage II.
Suppose b were a free resource; i.e., it commanded no price. An entrepreneur would want to
achieve the greatest efficiency possible from the factor for which he is paying, i.e., from factor
a. Thus, he would want to produce where AP is maximum or at the boundary between stage I
and II.
If on the other hand, a were the free resource, then he would want to employ b to its most
efficient point; this is the boundary between stage II and III.
Obviously, if both resources commanded a price, he would produce somewhere in stage II. At
what place in this stage production takes place would depend upon the relative prices of a and b.
Condition or Causes of Applicability:
There are many causes which are responsible for the application of the law of variable
proportions.
They are as follows:
1. Under Utilization of Fixed Factor:
In initial stage of production, fixed factors of production like land or machine, is under-utilized.
More units of variable factor, like labour, are needed for its proper utilization. As a result of
employment of additional units of variable factors there is proper utilization of fixed factor. In
short, increasing returns to a factor begins to manifest itself in the first stage.
2. Fixed Factors of Production.
The foremost cause of the operation of this law is that some of the factors of production are
fixed during the short period. When the fixed factor is used with variable factor, then its ratio
compared to variable factor falls. Production is the result of the co-operation of all factors.
When an additional unit of a variable factor has to produce with the help of relatively fixed
factor, then the marginal return of variable factor begins to decline.
3. Optimum Production:
After making the optimum use of a fixed factor, then the marginal return of such variable factor
begins to diminish. The simple reason is that after the optimum use, the ratio of fixed and
variable factors become defective. Let us suppose a machine is a fixed factor of production. It is
put to optimum use when 4 labourers are employed on it. If 5 labourers are put on it, then total
production increases very little and the marginal product diminishes.
4. Imperfect Substitutes:
Mrs. Joan Robinson has put the argument that imperfect substitution of factors is mainly
responsible for the operation of the law of diminishing returns. One factor cannot be used in
place of the other factor. After optimum use of fixed factors, variable factors are increased and
the amount of fixed factor could be increased by its substitutes.
Such a substitution would increase the production in the same proportion as earlier. But in real
practice factors are imperfect substitutes. However, after the optimum use of a fixed factor, it
cannot be substituted by another factor.
Applicability of the Law of Variable Proportions:
The law of variable proportions is universal as it applies to all fields of production. This law
applies to any field of production where some factors are fixed and others are variable. That is
why it is called the law of universal application.
The main cause of application of this law is the fixity of any one factor. Land, mines, fisheries,
and house building etc. are not the only examples of fixed factors. Machines, raw materials may
also become fixed in the short period. Therefore, this law holds good in all activities of
production etc. agriculture, mining, manufacturing industries.
1. Application to Agriculture:
With a view of raising agricultural production, labour and capital can be increased to any extent
but not the land, being fixed factor. Thus when more and more units of variable factors like
labour and capital are applied to a fixed factor then their marginal product starts to diminish and
this law becomes operative.
2. Application to Industries:
In order to increase production of manufactured goods, factors of production has to be
increased. It can be increased as desired for a long period, being variable factors. Thus, law of
increasing returns operates in industries for a long period. But, this situation arises when
additional units of labour, capital and enterprise are of inferior quality or are available at higher
cost.
As a result, after a point, marginal product increases less proportionately than increase in the
units of labour and capital. In this way, the law is equally valid in industries.
Postponement of the Law:
The postponement of the law of variable proportions is possible under following
conditions:
(i) Improvement in Technique of Production:
The operation of the law can be postponed in case variable factors techniques of production are
improved.
(ii) Perfect Substitute:
The law of variable proportion can also be postponed in case factors of production are made
perfect substitutes i.e., when one factor can be substituted for the other .

Q.4 what are perfect and imperfect markets? What are the
different classifications of a market?

The time period ‘marketplace’ originated from Latin word ‘marcatus’ having a verb ‘mercari’
implying ‘products’ ‘ware traffic’ or ‘an area wherein business is carried out’. For a layman,
the phrase ‘market’ stands for a place where goods and people are physically gift. For him,
‘marketplace’ is ‘marketplace’ who speaks of ‘fish market’, ‘mutton market’, ‘meat market’,
‘vegetable marketplace’, ‘fruit market’, ‘grain marketplace’. For him, it's far a congregation
of shoppers and dealers to transact a deal. However, for us as the scholars of marketing, it
approach an awful lot extra. In a broader feel, it's far the complete of any location wherein
buyers and dealers are brought into contact with one another and by using which the fees of
the goods have a tendency to be equalized without difficulty and quickly.

Classification of Markets—Traditional:

Markets may be categorised on one of a kind bases of which maximum common bases are:
area, time, transactions, law, and extent of business, nature of goods, and nature of
opposition, call for and deliver conditions. This classification is off-shoot of conventional
approach.

Traditionally, a marketplace become a physical area where buyers and sellers accrued to
shop for and sell the products. Economists describe a marketplace as a collection buyers and
sellers who transact over a particular product or product elegance.

A. On the Basis of Area:

Using vicinity, there may be local, local, national and worldwide markets. Local markets
confine to locality frequently dealing in perishable and semi-perishable goods like fish,
vegetation, greens, eggs, milk, and others. Regional market covers a wider location can be a
district, a kingdom or inter-country dealing in durables both patron and non durables and
commercial merchandise, together with agricultural produce.

In case of countrywide markets the region protected are national boundaries dealing in long
lasting and non-long lasting consumer goods, industrial items, metals, woodland
merchandise, agricultural produce.

In case of world or international marketplace, the movement of goods is significant all

through the sector, making it as a single marketplace. It ought to be referred to that because
of the trendy technologies in delivery, storage and packaging, even the maximum perishable
items are offered all over the global, no longer that only durables.
 B. On the basis of Time:

The time period is the element. Accordingly, there can be quick duration and lengthy period
markets. Short-duration markets are for especially perishable items of a wide variety and lengthy-duration
markets are for durable goods of different sorts may be produced or synthetic.

C. On the idea of Transactions:

Taking the nature of transactions, these may be ‘spot’ and ‘destiny’ markets. In ‘spot’ market,
once the transaction takes region, the transport takes place, at the same time as in case of
future markets, transactions are finalized pending shipping and payment for future dates.

D. On the basis of Regulation:

Taking law, markets can be regulated and non-regulated. A ‘regulated market’ is one wherein
business dealings take region as per set regulations and guidelines concerning, satisfactory,
price, supply changes and so forth.

These may be in agricultural products or produce and securities. On the other hand,
unregulated market is a unfastened marketplace in which there are no guidelines and
guidelines; despite the fact that they are there, they're amended as in keeping with the
necessities of parties of alternate.

E. On the Basis of Volume of Business:

Taking extent of business as a foundation, there can be kinds of markets specifically,

“Wholesale” and “Retail”. Wholesale markets are featured with the aid of massive volume
business and wholesalers.On the other hand, ‘Retail’ markets are those wherein quantity
offered and offered is on small-scale. The dealers are stores who buy from wholesalers and
promote again to customers.

F. On the basis of Nature of Goods:

Taking the nature of products, there can be commodity markets, capital markets. ‘Commodity’
markets deal in favour of fabric, produce, manufactured goods can be client and commercial
and bullion marketplace dealing precious metals.

‘Capital’ market is a marketplace for finance. These markets may be subdivided into ‘money’
market dealing in lending, and borrowing of cash; ‘Securities’ market or ‘stock’ marketplace
dealing in shopping for and selling of stocks and debentures and ‘forex’ marketplace in which
it is a forex market dealing shopping for and promoting of foreign currencies may be hard or
smooth.

G. On the premise of Nature of Competition:

Based on opposition or competitive forces, there may be form of markets for a services or
products. However, best two are the most vital particularly, best and imperfect.

A ‘best’ market is one that is characterized by means of:

(a) Large variety of consumers and sellers

(b) Prevalence of single lowest charge for merchandise the ones are ‘homogeneous’

(c) The best information on the part of customers and dealers

(d) Free entry and exit of corporations in marketplace. These sorts for markets exist hardly.

The different one is ‘imperfect’ that's featured through:

(a) Products can be similar but not equal

(b) Different fees for a category of products

(c) Existence of physical and mental obstacles on movement of goods

(d) No perfect expertise of products and different dimensions at the a part of customers and
sellers.

H. On the idea of Demand and Supply:

Based on demand and supply situations or preserve of buyers and sellers, there can be seller’s
and buyer’s markets. A dealer’s marketplace is one where sellers are in motive force’s seat and
the buyers are on the receiving stop.

In different phrases, it's far a scenario wherein call for for items exceeds supply. On the other
hand, consumer’s market is one wherein consumers are in commanding role. That is, supply is
exceeding the call for for the goods.

Classification of Markets—Modern:

The present day class is based totally at the purchaser orientation due to the fact in modern-
day economic system client is the king-pin and a decisive using pressure.

Accordingly, the advertising and marketing professionals have recognized markets based
totally on such wide-based classification specifically, patron, enterprise, global and, non--
income and government markets.

Q.5 explain the following terms with suitable examples:

a. Supply of capital

It is the amount available for investment. It is called savings. It is the amount left after
consumption. It is the monetary value of products left after consumption. It is directly related to
interest rate if interest rate is high, the people save more to earn more interest and vice versa.
Symbolically,
In the above table, when interest rate is increased from 4% to 6% and 8% supply of capital
( savings) increases from Rs 6 billions to Rs 8 billions and Rs 10 billions respectively. If we
represent savings with respect to interest rate, we obtain an upwardly sloped curve.

The equilibrium interest rate is given by the point of intersection of investment and savings
curves. In the above figures, it is given by point E. However, the actual interest rate may be
above or below the equilibrium interest rate. If it is above the level of equilibrium, saving
exceeds investment. The excess supply of capital brings the interest rate down to equilibrium
level. If it is below the level of equilibrium, investment exceeds savings. The excess demand for
capital brigs the interest rate up to equilibrium level. It means sooner or later, the actual interest
rate comes to the equilibrium level even it is above or below than it at any instant.
The equilibrium interest rate is given by the point of intersection of investment and savings
curves. In the above figures, it is given by point E. However, the actual interest rate may be
above or below the equilibrium interest rate. If it is above the level of equilibrium, saving
exceeds investment. The excess supply of capital brings the interest rate down to equilibrium
level. If it is below the level of equilibrium, investment exceeds savings. The excess demand for
capital brigs the interest rate up to equilibrium level. It means sooner or later, the actual interest
rate comes to the equilibrium level even it is above or below than it at any instant.
The equilibrium interest rate is given by the point of intersection of investment and savings
curves. In the above figures, it is given by point E. However, the actual interest rate may be
above or below the equilibrium interest rate. If it is above the level of equilibrium, saving
exceeds investment. The excess supply of capital brings the interest rate down to equilibrium
level. If it is below the level of equilibrium, investment exceeds savings. The excess demand
interest rate comes to the equilibrium level even it is above or below than it at any instant.
Criticisms
1. Money is not veil and is not just a medium of exchange. It is asset too. More or less
money has effect on investment, production, employment level etc.

2. Money is not demanded or borrowed only for investment but also for speculation and
precaution

3. This theory is based upon diminishing marginal productivity of capital but there may be
increase in marginal productivity of capital due to advancement in technology,
improvement in human resource etc.

4. Both demand for capital and supply of capital are not only determined by interest rate
but also upon level of income

5. Supply of capital comes not only from saving but also from dishoarding, depreciation
fund etc.

6. Saving and investment are not independent of each other. They are affected by each
other.

b. Consumer Behavior
Studying consumer behavior is important because it helps marketers understand what influences
consumers’ buying decisions.
By understanding how consumers decide on a product, they can fill in the gap in the market and
identify the products that are needed and the products that are obsolete.
Studying consumer behavior also helps marketers decide how to present their products in a way
that generates a maximum impact on consumers. Understanding consumer buying behavior is
the key secret to reaching and engaging your clients, and converting them to purchase from you.
A consumer behavior analysis should reveal:
 What consumers think and how they feel about various alternatives (brands, products,
etc.);

 What influences consumers to choose between various options;

 Consumers’ behavior while researching and shopping;

 How consumers’ environment (friends, family, media, etc.) influences their behavior.

Consumer behavior is often influenced by different factors. Marketers should study consumer
purchase patterns and figure out buyer trends.
In most cases, brands influence consumer behavior only with the things they can control; think
about how IKEA seems to compel you to spend more than what you intended to every time you
walk into the store.
So what are the factors that influence consumers to say yes? There are three categories of
factors that influence consumer behavior:
1. Personal factors: an individual’s interests and opinions can be influenced by
demographics (age, gender, culture, etc.).

2. Psychological factors: an individual’s response to a marketing message will depend on

their perceptions and attitudes.
 3. Social factors: family, friends, education level, social media, income, all influence
consumers’ behavior.