Consumer choice theory helps us understand how markets work. It looks at how people decide to spend their money. Here’s why it's important:
Utility and Satisfaction: People want to get the most satisfaction, or utility, from what they buy. The more satisfaction they feel, the better!
Marginal Utility: When people buy more of something, they think about how much extra satisfaction they get from each additional item. This is called marginal utility. It helps explain why someone might stop buying something they like.
Budget Constraints: Everyone has a limited amount of money to spend. Understanding how people spend their money on different items shows us patterns in how the market behaves.
When we look at these parts together, we can better understand why people make certain choices. This helps us see how supply and demand in the market are all related!
Consumer choice theory helps us understand how markets work. It looks at how people decide to spend their money. Here’s why it's important:
Utility and Satisfaction: People want to get the most satisfaction, or utility, from what they buy. The more satisfaction they feel, the better!
Marginal Utility: When people buy more of something, they think about how much extra satisfaction they get from each additional item. This is called marginal utility. It helps explain why someone might stop buying something they like.
Budget Constraints: Everyone has a limited amount of money to spend. Understanding how people spend their money on different items shows us patterns in how the market behaves.
When we look at these parts together, we can better understand why people make certain choices. This helps us see how supply and demand in the market are all related!