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When consumer choice is considered, the idea of consumer utility is also considered.Utility can be imagined as the satisfaction/ enjoyment that a consumer may receive from consuming a certain product.
The law of ‘Diminishing Returns’ must also be considered here given that it could be expected that as a consumer demands more of a particular good; the utility received from that good decreases. However, what needs to be added here is the idea of the , and how this impacts on utility.
With this in mind, there is some link between the utility of the good and the price elasticity of the good.
For instance, one use of consumer theory is to showcase why the demand curve for many goods slopes downward.
However, moving on from these basic principles, consumer choice, and so consumer behaviour have far greater implications.
So, in the case of a holiday, the consumer will prefer two holidays to one.
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This assumption will later lead into a discussion on utility maximisation.
In this case, they would be indifferent when it comes to choosing any one of them given that the utility received is the same.
Figure 1 - Example Indifference Curve for Apples vs.
The following chapter will discuss consumer choice, considering theory behind utility maximisation, opportunity costs and consumer preferences.
The theory of consumer choice is focused in microeconomics, relating to preferences for consumer expenditure, which in turn impacts on consumer demand curves.