3. Development of Behavioral Economics

Consumer Choice - Key takeaways

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  Consumer choice explains why consumers make the choices that they do, given their budget and preferences.
  
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  Utility is the amount of satisfaction a choice provides and will influence the choice a consumer makes.
  
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  Four assumptions that the consumer choice theory makes are that consumers will behave rationally, they are on a budget, their preferences impact their consumption, and they will look to optimize and gain maximum utility from their budget.
  
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  Consumer choice helps us understand the demand curve since it is a product of the choices consumers make given the price of a good.
  
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  A critique of consumer choice theory is that it attempts to use explicit values to form an economic analysis out of something implicit like human emotions.