The formal economic analysis of demand is based on a few propositions about consumer behaviour. Consumers are assumed to have limited resources so that there is a budget constraint on their expenditure. They derive utility from goods and services purchased. Utility is what the goods bought are worth to the consumer and is measured in cash terms for analytical purposes. Consumers are assumed to be rational and have the maximisation of utility as their expenditure objective. Each single additional purchase by the consumer is a marginal purchase and provides marginal utility. The marginal utility of an extra quantity of a particular good or service usually falls, and never rises, as the volume of purchases increases. Expenditure decisions are based on the marginal utility of the marginal purchase compared with its price. No more purchases will be made if marginal utility of an extra purchase is less than the price. A consumer's total utility is the sum of the utility of all purchases.

Inspec keywords: telecommunication services; consumer behaviour

Other keywords: marginal utility; formal economic analysis; demand structure; marginal purchase; consumer behaviour; world telecommunication economics

Subjects: Telecommunication applications