Nowadays, we notice that our needs and wants are not as same as others and vice versa. Each consumer has different preferences for products based on their lifestyle, culture, environment and wants. In his/her day-to-day life, on the basis of satisfaction derived, a rational consumer makes buying decision. But how does consumer makes buying decision and the quantity of particular goods which he/she is going to consume?

This concept in the field of economics is termed as consumer preference. Precisely, consumer preference is defined as the set of assumptions that decides consumer choice that results in different alternatives such as happiness, satisfaction and utility. It allows a consumer to rank different bundles of goods according to utility derived. These preferences are independent of income and price. One can have a preference of luxury house instead of a simple living home. But can consumer go for luxury house if he/she does not possess income and price affordability? This makes buying decision different from consumer preferences. 

How does consumer makes buying decision?

Consumer makes buying decision by allocating their scarce income across all possible goods to maximize their satisfaction. The satisfaction derived from consuming these goods is termed as ‘utility’. It is measured in terms of utils. For example, for same quantity say, 6 units of both goods, if Gita derives 1 util of satisfaction from fruit consumption and 0.5 utils from consumption of chocolate bars. This shows there is more satisfaction from consumption of fruits than chocolate bars, then utils assigned to fruits will be 6 in comparison to 3 by chocolate bars. Therefore, she will allocate more of her income for buying fruits. This approach is termed as cardinal approach propounded by Alfred Marshall. 

    

However, in practical life, it is not possible to calculate number of utils. In practical life also, Gita generally say that she likes more of fruits over chocolate bars. Therefore J.R. Hicks propounded a more practical approach termed as ordinal approach. In this approach, satisfaction from consumption is not countable and thus they are ranked in order of their preference. This approach compares the level of satisfaction without any numeral quantity assigned to it hence it gives more robust results. The curve which depicts the bundle of two goods which provide equal level of satisfaction is called as indifference curve. On this curve all bundles of two goods provide same level of satisfaction. Taking the same example, let us say, Gita has a limited amount of income which she wishes to spend on fruits and chocolate bars. Let us suppose that the following quantity of commodities are equally valued by her-

                          

Fruits (by quantity)	Chocolate bars    (by quantity)
16	2
12	5
11	7
10	10
9	15

                                               

           

It is a matter of indifference for the consumer as to which combination Gita buys. She may buy 16 units of fruits and only 2 chocolate bars or 11 units of fruits and 7 fruits of chocolate bars. All these combinations are equally preferred by her. An indifference curve is thus composed of a set of consumption alternatives which yield the same amount of satisfaction. 

                        

Conclusion

From the above explanation it is very evident that if a rational consumer chooses a certain bundle of goods keeping in mind the income and satisfaction derived, he/she can choose any bundle provided his income. He won’t be restricted to one bundle and this can help the consumer to change the quantity of consumption whenever he wants. However, in real world we find irrational consumers who decide the consumption of goods not on the basis of satisfaction derived but on the basis of ongoing trend, greed, income status and desires. 

Hope you had a good read and will be a rational consumer! 

Thank you :)

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