Conceptualization of nonmarket events and phenomena into an economic theory of consumer behavior

• Main Author: Morris, Owen Richard
• Other Authors: Halter, Albert N.
• Language: en_US
• Published: 2012
• Subjects: Consumption (Economics)
• Online Access: http://hdl.handle.net/1957/26503

The traditional Hicks-Allen theory was presented and modified by (1) formulating the consumer's budget constraint with a weak inequality, (2) deriving the Slutsky equation in matrix notation and (3) demonstrating that the income and substitution effects could be derived directly from the partial derivatives of the consumer's demand functions. Two examples of human behavior in the commodity markets were presented, which refute the Hicks-Allen theory. Conceptualizing these examples and similar ones into an economic theory of consumer behavior was the objective of the inquiry. The Hicks-Allen concept of the consumer's utility function was modified by including a set of variables to represent the state of the consumer's environment, These variables were then constrained to imposed levels which were assumed beyond detectable influence by the individual consumer. The traditional problems of (1) determining the consumer's optimal budget, (2) determining the rates at which the consumer adjusts his purchases in response to the determinants of his demands, (3) classifying commodities and inter-commodity relationships, were re-examined. The results were: (1) The consumer's demand functions contain a set of variables representing the imposed state of his environment, (2) The consumer's rates of adjusting his optimal purchases contain additional influences in response to changes in the imposed state of his environment, and (3) An economic classification was proposed for the components of the consumer's environment. To demonstrate the proposed modification a numerical example was given depicting a consumer choosing his optimal budget in a two commodity market contained in a one dimensional environment. The proposed modification was subjected to critical scrutiny and its testability was discussed. Two classes of problems, (a) relating the individual's decisions of how much or how he will utilize any portion of his environment, and (b) determining any economic value for the environment, are not rendered intelligible or comprehensible with the proposed modification. Two classes of problems for further inquiry were suggested, (a) metaphysical problems of demarcating an individual's consumption and his use of an item from his environment, and (b) reformulating the theory of production and the theory of equilibrium price determination along the same lines as the proposed modification. The proposed modification of the Hicks-Allen theory and the method used to analyze the effects of this modification represent the contributions made by this inquiry. === Graduation date: 1970