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Theory of Consumer Behavior: An Islamic Perspective

KHAN, MUHAMMAD AKRAM (2020): Theory of Consumer Behavior: An Islamic Perspective.

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The paper supplements the theory of consumer behavior with insights from the primary sources of Islam. A consumer who maximizes utility operates within four dimensions: moderation, extravagance, waste, and niggardliness. These dimensions take different meanings in each social stratum. A complicating factor is the context of consumption which could be individual, social, or public. For each social stratum and for each context, these dimensions have different meanings. The paper suggests using the methodology of behavioral economics for defining the dimensions of consumption. It elaborates the concept of marginal propensity to consume into four propensities: marginal propensity to moderation, extravagance, waste, and niggardliness. That necessitates re-defining the law of demand, leading to four curves instead of the one usually found in the economics textbooks. The last part of the paper relates consumer behavior with material well-being and happiness and concludes that moderation leads to the highest levels of happiness as compared to other dimensions of the consumer behavior.

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