Theory of consumer choice

Purpose of Assignment

Week 5 exposes students to subjects that are intended to whet their appetites for further study in economics. Students will use the theory of consumer choice and the impact of the concepts of asymmetric information, political economy, and behavior economics, to describe how consumers make economic decisions.

Assignment Steps

Scenario: You have been asked to assist your organization’s marketing department to better understand how consumers make economic decisions.

Write a analysis including the following:

  • The impact the theory of consumer choice has on:         Demand curves
  • Higher wages
  • Higher interest rates
  • The role asymmetric information has in many economic transactions.
  • The Condorcet Paradox and Arrow’s Impossibility Theorem in the political economy.
  • People are not rational in behavior economics.

Cite a minimum of three peer-reviewed sources not including your textbook.

Format your paper consistent with APA guidelines.



Theory of consumer choice







The process of decision making may be quite complex depending on what grounds and circumstances the decisions are made. Economic decisions are very important and must be carefully thought about by consumers and other individuals since this impact on the economic development of a region and ultimately a country. The study of how consumers make economics decisions is expounded by the consumer theory which attempts to explain how individual consumers decide to spend their money on certain products based on their preferences and budget constraints they are faced with (Hansen, 1972)

Consumer theory shows how individuals make choices of what commodity to buy, at what price they should buy the product, and from whom. To arrive at some convenient point, consumers must put regard for various factors such as their level of income and the prices of goods and services in the market. Essentially, given consumers’ level of income and the prices of goods and services, consumers will chose bundles of commodities which give them the greatest rather maximum benefit i.e. the combination of goods and services which provide maximum utility (Lancaster, 1966)

This paper analyses the impact consumer theory has demand curves, higher wages and higher interest rates. It also addresses the role of information asymmetry and its impacts on economic transactions. I will also

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