Question

For which of the following goods is the utility you get from consuming them likely to be affected by the opinions of others? [LO 7.5] a. MP3s. b. A new car. c. Running shoes. d. A new laptop for class.

Short answer

A new car's utility is likely most affected by others' opinions.

Step-by-step solution

Understand Utility

Utility in economics refers to the satisfaction or pleasure that a consumer derives from consuming a good or service. This satisfaction can be influenced by various factors, including peer opinions, especially with products considered luxury or status items.

Analyze Options

Consider each option to determine if its utility is influenced by opinions of others: - **MP3s**: Generally personal and less visible consumption, less likely influenced by others. - **A new car**: Highly visible status symbol; often influenced by what others think. - **Running shoes**: Usually a personal choice for fitness; opinions may matter for brands but not highly. - **A new laptop for class**: Primarily functional, although brand opinions could play a small role. However, utility mostly depends on personal needs rather than others' opinions.

Determine Which is Most Affected

Among the options given, a new car is the good for which utility is most notably influenced by the opinions of others. Cars serve as status symbols and are often purchased with consideration of what others perceive.

Key concepts

Luxury Goods

Luxury goods are items that are often expensive and not necessarily needed for basic living but provide additional comfort, prestige, or style. These products convey an image of wealth or status and may include high-end clothing, luxury cars, or designer accessories. People often purchase these goods to experience satisfaction not only from the quality of the product but also from the social recognition they bring.
Buying luxury goods can be associated with several motivations:

• Enhancing self-esteem: Owning such items can make individuals feel successful or accomplished.
• Exclusive access: Luxury items are sometimes limited edition, which adds an element of prestige for the owner.
• Quality assurance: Luxury goods are typically associated with higher quality and craftsmanship.

It's important to note that the appeal of luxury goods can vary between individuals. For some, it might be rooted deeply in personal values, while for others, it's driven by the desire to impress peers or maintain a certain social standing.

Peer Influence

Peer influence refers to the impact that people within the same age group, social class, or work environment have on an individual's attitudes, behaviors, and decision-making processes. It plays a significant role, not only in adolescents but also in adult consumer behavior.
When it comes to purchasing decisions, peer influence can manifest in several ways:

• Trend adoption: People are likely to buy products that their peers have or desire, often to fit in with a group.
• Trust in judgment: Relying on friends or family opinions can guide someone towards certain products believed to offer the best value or style.
• Buying decisions: Feelings of belonging and identity can be strongly tied to products influenced by one's peer group.

In the context of luxury goods and status symbols, peer influence is often powerful, as these items can signify belonging to a desired social group.

Status Symbols

Status symbols are objects that signify an individual's social or economic status. These items often reflect wealth, success, or prestige and are recognizable by society as markers of an elevated position.
Status symbols can include a range of products, from brand-name clothing to high-end cars. Their primary value lies not in their functional utility but in the statement they make about the owner's place in society.

• Visibility: Status symbols are typically high-profile items that are easily noticed by others, such as a luxury car.
• Cultural significance: What constitutes a status symbol can vary greatly depending on cultural values and norms.
• Aspirational value: Many people are motivated to acquire status symbols to display their success and aspirations to others.

Understanding how status symbols function can provide insights into consumer behavior, particularly regarding why people might choose to purchase one product over another, even when practical needs do not strongly dictate such a choice.