Consumer choice

The theory of consumer choice (or consumer demand theory) is the branch of microeconomics that relates preferences for the consumption of both goods and services to the consumption expenditures; ultimately, this relationship between preferences and consumption expenditures is used to relate preferences to consumer demand curves.

Analogous to production theory, consumers will choose to purchase and consume a combination of goods that will maximize their happiness or “utility”, subject to the constraint of how much income they have available to spend. The link between personal preferences, consumption, and the demand curve is one of the most closely studied relations in economics. It is a way of analyzing how consumers may achieve equilibrium between preferences and expenditures by maximizing utility subject to consumer budget constraints.

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