and economic factors. •socioeconomic change •The study of social economics seeks to predict what kind of results to expect when the society has been changed. It does this by studying politics, history and other social sciences. •Understand the socioeconomic factors affecting business will help you make better decisions about the future and direction of your business. To have an intimate understanding, however, you will have to understand both external and environmental factors, as well as how their interplay affects your business. • This is a special term that refers to the process of looking at the external socioeconomic issues in a business. It is considered a part of general business analysis, so it is useful to the executives of a company. It can help them grow the organization, increase the streams of revenue the company receives and also get ahead of competitors. • A subset of environmental analysis is the PEST analysis, or some of its variants, such as the PESTLE analysis. This is a form of analysis that looks at four relevant factors that affect a business environment, and these – Political, Economic, Social and Technological factors – create the acronym “PEST.” There are other variations, such as PESTLE, which includes Legal and Environmental factors. However, the four factors in PEST analysis are the main economic factors that affect a business. •Consumer Theory describes how consumers make decisions on what to buy. •Consumption refers to the use of goods and services to satisfy human wants directly. •A consumer aims to maximize the satisfaction he/she derives from the use of a good or a service. Utility is the term used for satisfaction. Utility is something intangible. As such, it is not easy to measure. •Quantifiable goods are subject to measurement; they can be expressed in numerical values. In order to make it easy to understand the concept of utility, we shall assume that it is measurable in units, which we shall call utils. • A util is one unit of satisfaction. The utility function shows the relationship between utility and consumption. In equation form, it is: U f(C), which simply stated is: utility is a function of consumption. Also, to be more specific, utility for the consumption of goods X and Y can be expressed as: Important measures of utility are: Total Utility and Marginal Utility. •Total Utility refers to the combined utility derived from consuming certain units of a good. •Marginal Utility refers to the additional utility derived from consuming an additional unit of the good. •The Law Of Diminishing Marginal Utility states that all else equal as consumption increases the marginal utility derived from each additional unit declines. Marginal utility is derived as the change in utility as an additional unit is consumed. QUANTITY OF TOTAL UTILITY MARGINAL UTILITY CONSUMPTION 1 8 8 2 15 7 3 21 6 4 26 5 5 30 4 6 33 3 7 35 2 8 36 1 9 36 0 10 35 -1 • The consumer is the person who buys the product business offers for sale. It is therefore imperative that we get to please the consumer, so he/she will buy from us instead of from our competitors and also that once he buys from us he will be loyal to us and not buy from other sellers of the same product. Knowing how consumer satisfaction is maximized will help a business in always keeping the consumer's welfare the topmost priority.