Consumer`s sovereignty is an important topic of micro economics.

1. WELCOME

2. Consumer sovereignty
PREPARED BY
RAVI SHREY
Ph.D. Scholar,
Agricultural Economics,
DEPARTMENT OF AGRICULTURAL ECONOMICS
C.O.A., I.G.K.V., RAIPUR (C.G.)

3. INTRODUCTION
 Producer sovereignty is the condition when firms have the power and ability
to influence consumer decisions. For example, in a monopoly consumers
have no choice and have to pay the price and buy the goods offered by firms.
 In other word Producer sovereignty means that it is firms who will decide
what to do. For example, some argue persuasive advertising techniques
mean consumers will buy what firms wish to sell.
 In reality, there is a mixture of both consumer and producer sovereignty. But,
if markets are more competitive, consumer sovereignty plays a more
important role.

4. Consumer sovereignty–
The ability and freedom of consumers to choose from a range of
different goods and services is called consumer sovereignty. It means
that ultimately it is consumers who will decide what is produced and how
scarce resources are allocated.
Consumer sovereignty is an important concept for classical economics.
This assumes that consumers have the freedom and ability to choose
between different suppliers and firms. In theory, consumers will use their
discretion to choose the cheapest and / or best quality goods. In theory
this consumer sovereignty ensures the effective functioning of free
markets. It rewards efficient firms and encourages firms to provide goods
consumers want.

5. Important Contributions
• The term was coined by William Harold Hutt in his
book Economists and the Public (1936).
• Thus consumer sovereignty forms an important aspect of free
market economics, it is a function developed by the economist
Ludwig Van Mises.
• Prof. Benham called the consumer as the King or sovereign.

6. History-
“Consumer sovereignty” is one of those concepts that flourish and
are widely influential long before they are explicitly recognized and
named. (Their belated recognition is often concomitant with their
decline.) Much of the substance of consumer sovereignty is implied
in Adam Smith. The focus of subsequent classical economics on
cost of production as the basic determinant of market decisions
temporarily sidetracked this emphasis. It returned more strongly
with the Austrian school of Wieser and Menger, and in the work of
Jevons, Pareto, Marshall, Pigou, and Wicksell.
HISTORY

7. Consumer sovereignty has been used in both a descriptive and a
normative form. In the first form, the term simply means that all
economic processes are ultimately focused toward satisfying the
wants of the final consumer. Production, exchange, and
distribution are all means; consumption is the end. Moreover, in a
free market system, market performance is in fact responsive to
the specific wants of the consumers within the system.
The question of how responsive leads to the normative form. As a
normative principle, consumer sovereignty asserts that the
performance of any economy ought to be evaluated in terms of
how well it fulfills the wants of its consumers. Performance will be
affected by the structural characteristics of the economy, by public
policy, by behavior of participants that is not uniquely determined
by structure and public policy, and by certain external
circumstances.
HISTORY

8. Association of Consumer sovereignty with a free
market economy
Consumer sovereignty has been frequently associated closely
but misleadingly with a free market economy. Since it can help
to isolate the boundaries of the principle, we shall examine the
alleged association. It comprises the following four steps:
(1) Knowledge of consumer wants. No one knows what a
consumer wants as well as he does himself. Consequently, his
wants will be best reflected in his market demand for
commodities.
(2) Expression of wants. Consumer demand is best expressed in
terms of actual choices made by consumers in the market—in
terms of market transactions—since, being rational, consumers
will adequately inform themselves of how best to realize their
wants in the presence of given opportunities.

9. Association of Consumer sovereignty with a free
market economy
(3) Responsiveness of production to wants. Free enterprise,
directed by the profit motive and intense competition in all
markets, brings about the best possible adaptation of resources
to meet consumer market demands, given the available
resources and state of technology. “Best” is defined as a set of
outcomes such that, whichever one of these obtains, no feasible
alteration can bring about an alternative outcome in which any
individual is made better off without at least one individual
being made worse off.

10. Association of Consumer sovereignty with a free
market economy
(4) Laissez-faire. So long as the conditions for a free competitive market
system obtain, a laissez-faire public policy will lead to a maximum degree of
consumer sovereignty.The emphases in this version are on individualism, on
free competitive markets, and on laissez faire. “Wants” are the wants of
individual consumers; individual consumers know their own wants; they are
self-motivated to become informed about the real alternatives available to
them; and competition both protects them against exploitation and
guarantees appropriate responsiveness in the use of resources to meet their
expressed wants. Thus, governmental interference is at best superfluous
and, more likely, destructive of consumer sovereignty. Finally, the very
criterion by which the appropriateness of market response is evaluated is
one that refuses to sacrifice any one consumer's well-being to that of others.

11. Limitations of consumer sovereignty
Consumer`s sovereignty is a myth because the
consumers freedom of choice is limited by the
following factors.
1. Unequal income distribution
2. Availability of goods
3. Combine choice
4. Consumer not rational
5. Society`s customs

12. Limitations of consumer sovereignty
6. Fashions
7. Standardized goods
8. Advertisement and propaganda
9. Monopoly
10. Government restrictions
11. Taxation

13. We may conclude that consumer`s sovereignty in
modern times is a myth and not a reality. The
consumer is not a king or queen but a slave in the
hands of producers, the state and of his habits,
customs and environment. He does not posses
any freedom of choice.
Conclusion

14. Refferences
(1) www.wikipedia.org
(2) M. L. Jhingan, Micro economic theory, Vrinda publications
(P) Ltd (7 Edition).

15. THANK YOU