theory of consumer behaviour

theory of consumer behaviour

the body of theory concerned with how individual consumers allocate their income in buying GOODS and SERVICES. A basic assumption made by the theory is that consumers seek to maximize the UTILITY, or satisfaction to be derived from spending a fixed amount of income. The theory provides an explanation of why DEMAND CURVES slope downwards. See CONSUMER EQUILIBRIUM, DIMINISHING MARGINAL UTILITY, PRICE EFFECT, INCOME EFFECT, SUBSTITUTION EFFECT, REVEALED REFERENCE, ECONOMIC MAN.
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