Friday, October 19, 2012

Topic 11: Brand Names and Utility

Consider the definition of utility: The benefit or satisfaction that a person gets from the consumption of goods and services.

After watching the video, "No Frills Grocery Shopping," write about the effect that brand names have on utility, or sense of satisfaction, that you receive when consuming goods or services. For example, how does your demand curve differ for various products (quantity demanded at different price levels) when comparing brand-name products and no-name or generic products? All things being equal (ceteris paribus), such as quality, durability, and so on, do you think a product having a brand name brings you more utility? If so, how does it do so? If not, why not? Provide specific examples of products that you feel must be brand name for you get get the most utility from, as well as products for which a brand name is not important.

  • Brand names have an effect on utility because it affects the limbic system, or the emotional part of the brain, to a certain degree. Brand names provide people a feeling of belonging to a cool or identified group of people who also buy that item. For example, if a product is advertised by an idol, then the person who buys the product may feel as if they are as superior as that idol. The product is automatically associated with coolness.
  • My demand curve for brand name products does differ from my demand curve for no name products. This is because brand name products are more elastic, more responsive to price. To me, they are luxuries, so I can forgo these products for other products that are necessities.
  • As I as in the above paragraphs, buying brand name products gives people a sense, a feeling of belonging. This is the same for me. A very good example would be clothing and other accessories such as bags and shoes; these are the things that would be compared and shown to peers and other social groups. By buying the same type of clothes, I get a strong sense of utility because I belong and have something to talk about with my friends. A product in which a brand name is not important is water - it doesn't matter the type of water I drink as long as it's water.

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