Consumer_Choice_JenB.doc

Consumer_Choice_JenB.doc - 1 Theory of Consumer Choice and...

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1 Theory of Consumer Choice and Frontiers of Microeconomics Jennifer Boggan ECO/365 September 18, 2017 Benjamin Zuckerman
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2 Theory of Consumer Choice and Frontiers of Microeconomics The purpose of this analysis is to aid our marketing department to better understand how consumers make economic decisions about how they buy and why they buy. We will examine the Theory of Consumer Choice and the impact this theory has on demand and demand curves, the impact of higher wages and high interest rates. We will define the term asymmetric and show the role asymmetric information has on economic transactions, as well as the political impact of economics. Consumer Choice and Demand Curves To understand the impact of consumer choice, we must first know what it means. Consumer choice is simply how and why one makes a purchase or uses a service. How they use their income and funds to decide what to buy and how much of it to buy. Demand is “how many goods and services are bought at various prices during a certain period. Demand is the consumer's need or desire to own the product or experience the service. It's constrained by the willingness and ability of the consumer to pay for the good or service at the price offered. Demand is the underlying force that drives everything in the economy. Fortunately for economics, people are never satisfied. They always want more. This drives economic growth and expansion. Without demand, no business would ever bother producing anything.” (“What is Demand: Definition and Impact,” 2017, para. 1). The demand curve represents the fluctuating relationship between the price of the good and the amount the customer is willing to buy at that price. Because these two concepts work in opposite directions, the demand curve is represented in a downward slope, which is caused by one of three occurrences – diminishing marginal utility, the income or the substitution effect.
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