Outline how consumer sovereignty determines patterns of production in an economy and discuss the factors that influence consumer choice.

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Outline how consumer sovereignty determines patterns of production in an economy and discuss the factors that influence consumer choice.

Consumer sovereignty is an economic term for the concept that, in a free market, consumers determine the goods that are produced; this makes them "sovereign" over production in an economy.

The theory of consumer sovereignty says that, while businesses and companies can produce anything they choose, if consumers do not want or need a product, it will not sell. If a product is not sold, it will not continue to be produced. Therefore, buyers ultimately decide what is produced.

Consumer sovereignty therefore is important in the role of determining patterns of production in an economy. Through the operation of consumer sovereignty, consumer income levels determine the types of production that occur. As an economy becomes more wealthy and income levels rise, demand for luxury good also rises as well as the production of luxury goods. Thus, as an economy experiences an upturn and consumer incomes rise, the production of luxury goods will increase. Similarly, the production of these items will decrease in economic downturn.

There are four main factors that influence consumer choice. They