Consumer Theory

Definition

Consumer theory is the study of how individuals make decisions about what goods and services to consume, given their limited income and preferences.

Related terms

Utility: Utility refers to the satisfaction or happiness that individuals derive from consuming goods and services.

Budget Constraint: The budget constraint represents the limit on a consumer's consumption choices due to their limited income.

Marginal Utility: Marginal utility measures the additional satisfaction gained from consuming one more unit of a good or service.