It is said that “under capitalism, the consumer is the King”. The Consumer, in a capitalist society, enjoys perfect freedom of consumption. It is his/her preference which influences and regulates the nature of economic activity in a capitalist economy. The entire productive activity in the country is undertaken to satisfy him. Every producer, before he/she initiates his/her production, has to study the nature of requirements of the consumer. He/she has to acquaint himself with the tastes and preferences of the consumer are the master, the king and the sovereign, who rules the capitalist economy. The producer is his servant.

The prices of the goods are fixed by market mechanism. The tastes, preferences and valuation of the consumer influence and regulate the equilibrium price and volume of production through demand. In short period, supply is constant. Hence demand plays a dominant role in price fixation. Thus, consumer rules the market kingdom.

The producer wants to earn the maximum possible profits. He invests his funds in that industry which is likely to yield him the maximum money returns on his capital investment. He will naturally choose that industry, the prices of whose products are likely to be high in the future. The prices of the products of an industry could not rise unless consumer extended his patronage to the industry. So ultimately, it is the preferences of the consumer which will guide the investor in the choice of industry. Though the goods are produced by the entrepreneur, in a capitalist economy, it is the consumer’s choices that determine the nature and level of productivity activity. Hence, Dr. Benham states, “The consumer is the King”.

Limitation to consumer’s sovereignty- (Consumer’s sovereignty is a myth)

Consumers express their demand for commodities in the form of the prices they are prepared to pay for them. The producers take prices as a signal for production and respond appropriately. When there is a shortage of a commodity, producers expand their supplies. When there is a surplus of a commodity, producers reduce its production to avoid losses. Since consumers are considered free to shift their demands from one set of commodities to another set, the producers are thought to bow down wishes of his customers at the risk of losses. On the other hand, a producer who would cater to the wishes of the consumers better would be rewarded with high profit. Thus, the consumer’s right to choice of brands of commodities or to purchase more or less of the same commodities or to purchase more or less of the same is declared to be a big merit of a competitive market economy. Hence, the consumer is considered the king of capitalist economy.

But economist J.K Galbaraith believes that the consumer’s sovereignty is a myth. Rather there is a producer’s sovereignty to which consumers have become captives. The limitations of consumer’s sovereignty are as follows:

  1. Productive powers– In a capitalist economy, the sovereignty of the consumer is limited by the productive powers of the community.
  2. State of technical knowledge– With a given state of technology, the consumer must feel satisfied with whatever goods are produced. Thus, the state of technical knowledge imposes another limitation on the sovereignty of the consumer.
  3. Low purchasing power– The purchasing power of the consumer sets limits to the range of goods which he can consume.
  4. Restriction by the state– The sovereignty of the consumer becomes circumscribed by State restriction on consumption. For example, the state may prohibit commodities like opium other noxious drugs.
  5. Monopoly– The existence of monopoly constitutes yet another limitation on the sovereignty of the consumer.


Asst.Prof.of Manegement—- Subrashek Dey.



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