Overview
Consumer theory is a vital part of economics that examines how individuals make choices about spending their resources. It focuses on understanding consumer preferences, budget constraints, and how these factors interact to influence market dynamics. By analyzing utility, budget constraints, and mar...
Key Terms
Example: Higher utility is achieved when a consumer enjoys a meal.
Example: If a consumer has $50, their budget constraint limits their choices to items within that budget.
Example: An indifference curve might show combinations of apples and oranges that yield equal satisfaction.
Example: When the price of a product is set at $10, and the quantity demanded matches the quantity supplied.
Example: If a consumer is willing to pay $20 for a product but buys it for $15, their consumer surplus is $5.
Example: If the price of coffee rises, consumers may buy more tea instead.