Question

In light of the current global pandemic causing an economic crisis, do you think Utility Theory is playing more or less of a role when it comes to people's purchase decisions? How might the events taking place impact consumer choice? Do you think Utility Theory applies with regard to public decision making and policy?

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Answer 1

In this current global pandemic causing an economic crisis, I do believe that utility theory explains an important role in the purchasing decision of the people because the purchasing power of the people totally depends on the income capacity and income efficiency of the people.

The purchasing power of the people also depends on the future certainty of the savings and income.

If there is a certainty of the income and there is the stability of the income then the purchasing power of the consumer will increase.

The concept of utility is very important in comparison to the expenditure of the consumer.

This pandemic reduces the purchasing power of the consumer and therefore the utility for non-necessity goods is decreasing.

In this pandemic, the income of the people globally will fall and therefore the capacity of expenditure of the consumer decreased.

Now the consumer is more focused towards the necessity goods in comparison to the non-necessity goods because for survival the necessary goods are important.

Public decision making and policy is affected by this pandemic and because of this effect, it will decrease the future consumption pattern of the consumer.