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Consumer Choice & Frontiers of Microeconomics 1 Theory of Consumer Choice & Frontiers of Microeconomics Sarah Bellin ECO/365 Professor Bayer
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Consumer Choice & Frontiers of Microeconomics 2 Having to understand the marketing department to understand better how consumers make economic decisions, is not something simple. There are multiple factors that need to be taken into effect. For example, the impact the theory of a consumer choice can affect the demand curves, higher wages, higher interest rate, the role asymmetric information has in many eco- nomic transactions. The first thing that must be understood is how consumer choice affects the demand curve. One of the Ten Principles of Economics is how people face trade-offs. The theory of consumer choice also takes a closer look at how people face trade-offs, and how they make decisions to changes in their environment. To help better understand economic decisions this pa- per will cover each important topics of consumer choice. Demand Curve To get a better understanding of this one must first understand what a demand curve is. “The demand curve is the marginal utility curve. The law of diminishing marginal utility implies that demand curves have a negative slope.” Mankiw, N. (2015) Another important point to un- derstand is, “The marginal utility of any good is the increase in service that the consumer gets from an additional unit of that good. Most products are assumed to exhibit diminishing marginal utility. The more of the good the consumer already has, the lower the marginal utility provided by an extra unit of that good” Mankiw, N. (2015). What all of this means is that a consumer is willing to trade off between what they want and another product. For example, if a customer
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