Neoclassical Economic Theory Why, According

At which point, they would consume even more of the different services that are being provided. This would have an impact on spending, as consumers would use the added savings to purchase additional services from the company. This shows that the character of human wants requires giving customers greater value. Once this takes place, is when they will begin to purchase other products. As a result, the assumptions about the character of human wants are: based upon financial benefits and added value that is provided. These elements are important, because they are the most significant factors that will shape consumer buying decisions. (“A Closer Look at the Demand Curve,” 109 — 116)

What this shows about consumer wants for various items, is that they are constantly changing and that any kind purchasing decisions are based upon two factors (income and value). Where, consumers will seek out those products that can address their basic wants and major concerns. This will have an impact upon other parts of the economy, with individuals spending the added savings in these areas (i.e. restaurants and purchasing trendy clothes). The reason why, is because their basic needs have been addressed through: the increased savings and values. At which point, various wants (which are items a person would like to have) become a focus of consumers. Once this takes place, it means that the added savings will be spent in various restaurants and purchasing fashionable clothing. This is important, because it highlights how once the basic needs of consumers have been addressed, as they will automatically spend the additional saving in the economy. This is due to the fact that they feel wealthier, which is having a direct impact upon their spending patterns. (“A Closer Look at the Demand Curve,” 109 — 116)

Compare the (neoclassical) idea of marginal utility (and utility) with conceptual / historical distinction between use-value and exchange-value, and the corresponding distinction between the economy and the private sphere.

Utility evolved out of businesses offering consumers a particular benefit. This could come in the form of: lower prices or there could be some kind of gimmick (such as offering additional products or services for free).

A good example of this can be seen with a bank offering customers a free toaster oven or windbreakers for opening an account. In this case, the idea is to provide the added benefit, so that the customer will have another reason to say yes to the offer. However, as competition became more intense (thanks in part to globalization), businesses, were forced to find additional ways to distinguish themselves. This meant that many different organizations would begin to bundle a host of products and services together, offering a significant discount on the price. The idea is to provide consumers with a deep discount and added value, to address their underlying needs (while saving them money). This is important, because the new strategy would create a change in the use value that consumers were receiving. A use value is when a particular good or service will be utilized for a specific purpose (as the consumer has no other intended use for the product). Under classical thinking, the utility (from the consumers perspective), required that businesses in the past address this need. Once globalization became a major factor, is when a new concept would be introduced through neoclassical thinking (exchange value). This is when a particular product or service can be exchanged in the marketplace, as another measure of value (outside of prices). As a result, businesses began offering consumers more of a value for the different goods and services that they wanted. This would have an impact on private businesses, by making them more focused on what products and services they are offering. As far as the economy is concerned, this would have an effect upon spending, as the increased value would have ripple effects on other sectors.


A Closer Look at the Demand Curve. N.d. 109 — 116. Print.

Demand, Supply and Price. N.d 53 — 71. Print.

The Competitive Firm.N.d. 155 — 160.

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