THEORY OF

CONSUMER
BEHAVIOR
Theory of Consumer
Behavior

FIRST PART OF ANY MICROECONOMIC

THEORY COURSE.
THE STUDY OF HOW PEOPLE MAKE
DECISIONS WHEN THEY PURCHASE.
CONSUMPTION IS GENERALLY
ASSOCIATED WITH THE LEVEL OF
SATISFACTION.
PROVIDES THE BASIC MODEL
PROVIDES THE THEORETICAL
FOUNDATION
UTILITY
OVERALL SATISFACTION
IT IS ASSOCIATED WITH CONSUMPTION

Xi represent goods in the economy

Consumption Bundles

each Xi has a quantity of goods

n represent different goods available

in the economy

Xi ≥ 0
 ASSUMPTIONS ABOUT
CONSUMER'S PREFERENCES

PREFERENCE RELATION

CONSUMERS ARE RATIONAL IN

THEIR CHOICE MAKING
DECISIONS.
 COMPLETENESS
THE CONSUMER ALWAYS SPECIFY ONE
OF THE FOLLOWING POSSIBILITIES

X' TO X''
X'' TO X'
indifferent between X'' TO X'

Consumer is never paralyzed by

indecision