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Consumer sovereignty is defined in the Macmillan dictionary of modern economics as: [7] The idea that the consumer is the best judge of his or her own welfare. This assumption underlies the theory of consumer behaviour and through it the bulk of economic analysis including the most widely accepted optimum in welfare economics, the Pareto optimum.
According to this analogy, consumers vote for "winners" and "losers" with their purchases. This argument was used to explain market allocations of goods and services under the catchphrase "consumer sovereignty". [citation needed] Consumer boycotts sometimes aim to change producers' behaviour. The goals of selective boycotts, or dollar voting ...
The doctrine of consumer sovereignty is applied to the provision of social goods in so far as the consumer buys national defence, police service, fire protection and electricity or water supply from the public sector of his own choice and according to the benefits received just as he buys food, clothes, fuel, tooth brushes and automobiles from ...
Sovereignty can generally be defined as supreme authority. [1] [2] [3] Sovereignty entails hierarchy within a state as well as external autonomy for states. [4]In any state, sovereignty is assigned to the person, body or institution that has the ultimate authority over other people and to change existing laws. [5]
The former case is known as a seller's market; the latter is known as a buyer's market or consumer sovereignty. [22] In either case, the disadvantaged group is known as price-takers and the advantaged group known as price-setters. [23]
This means that there is a divergence between private benefit and public benefit when a merit good is consumed (i.e. the public benefit is greater than the private benefit). However, as consumers only take into account private benefits when consuming most goods, it means that they are under-consumed (and so under-produced).
Consumer Bill of Rights § The right to choose – Guidelines for consumer protection; Consumer choice – Aspect of economics; Consumer sovereignty – Economic consumer theory; Equal opportunity – State of fairness in which individuals are all treated the same (with justified exceptions) Externality – In economics, an imposed cost or benefit
The right to consumer education states that consumers should be able to acquire knowledge and skills needed to make informed, confident choices about goods and services while being aware of basic consumer rights and responsibilities and how to act on them.