3. Development of Behavioral Economics


Consumer Choice - Key takeaways


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Consumer Choice - Key takeaways


  • Consumer choice explains why consumers make the choices that they do, given their budget and preferences.

  • Utility is the amount of satisfaction a choice provides and will influence the choice a consumer makes.

  • 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.

  • Consumer choice helps us understand the demand curve since it is a product of the choices consumers make given the price of a good.

  • 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.

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