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Sunday, 1 July 2018

The Theory Of Consumer Behaviour — Economics

Concept Of Utility 

The capacity of a good to give satisfaction is called "utility". In other words, utility is the satisfaction which a consumer derives from using a commodity or service at any particular time. 
  The economic meaning of utility should be distinguished from the meaning given to it by the man in the street. The ordinary meaning of utility is "usefulness". To the economist, the "usefulness" of anything is a matter of opinion, or subjective, and it is important in the sense expressed in the following example. 
    Many people say that the Nigerian-made hot drink, variously called "ekpeteshi", "aka mere", "ogogoro" is useless and does not possess any utility. This reasoning is faulty as far as the economist is concerned. The truth is that the hot drink satisfies a human want and, therefore, possesses utility or is useful. 
      Another thing to note about the definition of utility is that it relates to something at a particular time. The utility of anything is never fixes. The utility of a yam tuber, for example, will be more to a hungry man than to a man who has just finished taking a meal consisting of yam. 
   Utility, therefore, is difficult, if not impossible, to measure quantitatively, "it is", as someone has tried to describe it, "a mental state that refers to the amount of satisfaction the consumer estimates to have from the consumption of any commodity, ". 
   To understand the real meaning of utility, hence, is not easy. However, we can compare the utility of one commodity with that of another. 

Average Utility 

Average utility is the amount of satisfaction derived by a consumer per unit of a commodity consumed. 
   Average utility is derived by dividing the total utility by the number of units of the commodity consumed. 


"Margin" is a very important concept in economists. The living Webster encyclopedic Dictionary of English language defines the word "Margin" as "border of edge, a limit, or a condition beyond which something ceases to exist or be possible". The margin, in economics, means the boundary or borderline separating the purchases that are worth while from those that are not. 
       It is at the margin that we make a choice among alternatives. Our consumption of any commodity is determined by the decision we make at the margin. Suppose you already have five books on economics and you are contemplating the purchase of a sixth. The contemplated sixth book is known as your marginal volume. Your decision to purchase the book will depend on the additional gain you feel you will get from it and also on the other alternative choices that are open to you to spend your money. In other words, you are considering the marginal worth of the sixth book to you. When you have arrived at this stage, we say that you are on the "margin of consumption". 

Practical Importance of Marginal Analysis 
We have already noted that the margin is very important concept in economics. A very important concept in economics. 
It is at the margin that choices are made. This marginal analysis enables consumers to get the most out of their scarce resources. It helps buyers, who are sometimes in doubt of what to buy, who are sometimes in doubt of what to buy, or whether to buy a little more or less of a commodity, to make a decision. 
   People make marginal decisions daily. It is at the margin that a person decides what to buy, and it is his decision that determines the quantity of the good that is purchased and it's price in the market. In other words, it is at the margin that the purchaser weighs the prices of various goods in the market and adjust his budget to meet his various needs. 
    The most important concepts derived from this marginal approach are : Marginal utility, Marginal revenue, Marginal cost and Marginal product. Marginal cost is the cost of one further unit purchased of a commodity. 
     Marginal revenue is the additional revenue to the total revenue arising from the sale of an additional product. Marginal product is the additional or last unit of the product to be produced or turned out. Marginal utility is the utility or satisfaction received from consuming one more unit of a good or services 
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Agricultural Marketing

Agricultural Marketing involves a series of business activities or services associated with the transfer of agricultural commodities from the producers or farmers to the consumers. It is concerned with the movement of livestock and crops from thousands of scattered small-size farm where they are produced to the thousands of consumers located in rural and urban centres. Agricultural marketing includes the selling of farm inputs to farmers or the purchasing of farm inputs such as fertilizers, seeds, chemicals, implementation and the disposal of agricultural commodities to the final consumers or users.
   Marketing is a process, a function or an act of selling and thereby settling prices through the forces of supply and demand for that commodity. It involves all stages of operation which helps to move products from the farms to the ultimate consumers. These stages include assembling, preparation, grading, processing, packaging, storage, transportation, distribution, publicity and selling of products.

Stages/Functions involved in agricultural marketing 

   Marketing involves different stages. These stages are also referred to as marketing functions or services which are performed by the agricultural market agents or system. The stages or functions include:
1. Assembling 
2. Grading/sorting 
3. Processing 
4. Packaging 
5. Storage/Warehousing 
6. Transportation 
7. Advertisement and publicity 
8. Distribution 
9. Merchandizing/Pricing 

1. Assembling
This involves collecting farm products from different farmers so that they will be available in large quantities to attract buyers. This function can be performed by the farmer himself, an itinerant buyer or by a local market place. 

2. Grading/Sorting
It involves separating product using specifications or standard grading is needed to maintain high quality, enable good pricing policies and to promote exports. Some factors considered during grading include evenness of size, shape and quality, condition, purity, flavor and freedom from pest and diseases. This function of grading can be performed by the farmer, marketing organization or board and the wholesaler or retailer. 

3. Processing 
This involves changing the original form of the farm commodity to a more acceptable form to the consumer. Many farm products are processed before they are consumed. For example, cassava tubers are processed to garri, fruit and vegetables may be canned, seed cotton is ginned and spun into yarn. Processing increases the utility of most farm products. It also increases their value and price. The processing function can be performed by the farmers and the processors. 

4. Packaging 
This function involves putting farm products in small parcels or bundles. This makes some products such as eggs and sugar easier to handle. It also helps to compact others such as tobacco and cotton, by pressing them into bales. Packaging saves storage space and transport costs. It helps to keep products clean and protect them from damage at the same time adding value. Packaging can be performed by the farmer, processor, and other marketing agents such as the wholesalers. 

5. Storage/Warehousing 
   This involves keeping farm commodities for future use. The consumers demand for farm products very little throughout the year, but most farm production is seasonal. Storage or ware housing is necessary to make the product available throughout the year. Storage of farm produce can be done by the farmer or middleman. 

6. Transportation 
     This involves carrying of farm commodities from one place to another. All surplus farm produce needs some transport to the market place
This service can be provided by the farmer or middlemen. Where the roads are poor, transport cost is usually very high. This affects both the consumer and producer prices. 

7. Advertisement/Publicity
   It is concerned with making the existence of a farm product known to people. This is very important before products are distributed to stimulate or create demand. The creation of awareness for a product and stimulating demand is the task of advertising and other promotional activities. This is very useful to farmers selling uncontrolled products on the free market. The newspapers, electronic media like radio/television, farming press, sales literature, agricultural shows and trade fairs can be used to advertise farm commodities. 

8. Distribution 
        Distribution is concerned with sending or spreading out farm commodities from production area to individuals and places where they are needed. Traders, wholesalers and retailers help in the distribution network. 

9. Merchandising/Pricing 
     This involves buying and selling of farm commodities, through the negotiation of prices that are paid by buyers or received by sellers. 

Importance of Agricultural Marketing 

    The marketing of agricultural products has aimed great importance with movement from subsistence to commercial agriculture. This is because of the fact that excess production from the farms must be disposed off in order to earn income with which the farmers can purchase other goods and services not produced by them. Agricultural marketing is therefore making great contributions to the economic development of most developing countries such as Nigeria and Ghana. Specifically, the importance or contribution of Agricultural marketing in the economic development of the country include :
  1. Marketing makes it possible for farm products from farmers scattered in different places to reach the consumers in the farm, place and time they wanted. 
  2. Efficient marketing system location where there are surplus of farm produce and bring them to where there are shortages. 
  3. It is often time consuming for small farmers to take their surplus to a market place. Therefore, a middleman, a store keeper or itinerant trader buys from many farmers and sells to a marketing organization or directly to consumers. 
  4. An efficient marketing system gives farmers higher prices but also gives consumers lower ones and thus expand their buying power. 
  5. Marketing conditions influence the production of goods and services. This is because consumers show preference for products through the prices they are prepared to pay. This affects production decisions of farmers as they are most likely to produce commodities which are of high demand. 
  6. Production and marketing are often regarded as an integrated whole. This is due to the fact that an efficient marketing system ensures that agricultural inputs or resources are allocated efficiently. It means that farmers are most likely to shift resources from production of farm commodities having low demand and prices to the production of those commodities with high demand and prices. 
  7. Agricultural marketing provides employment for people who perform the different marketing functions such as assemblage, grading, transportation and others. 
  8. The need to improve the marketing of farm commodities creates incentives for government to development to develop infrastructure such as roads, water, storage facilities and others in rural areas to achieve market efficiency. 
  9. Marketing helps to stimulate research into the techniques of preserving agricultural products and the preparation of commodities to meet the different taste of consumers. 
  10. Agricultural marketing creates the multiplier effect in the economy for example, industries will develop to produce package materials for product and pee would be employed to be able to meet the demand. 
  11. The efficient marketing system ensures that products that are seasonal become available throughout the year with little price variation that can be attributed to the cost of storage function. 

 Agricultural Marketing Agents 

Agricultural marketing agents are the institution, organization individuals that carry out or perform marketing functions and offer marketing services. Agents involved in the marketing of farm commodities includes :
  • Marketing/Commodity boards
  • Cooperative societies 
  • Wholesalers 
  • Middlemen 
  • Retailers
  • Producers/Farmers/Manufacturers. 

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