464 PART SEVEN ADVANCED TOPIC a more complete understanding of demand, just as the theory of the competitive firm in Chapter 14 provides a more complete understanding of supply. One of the Ten Principles of Economics discussed in Chapter 1 is that people face tradeoffs. The theory of consumer choice examines the tradeoffs that people face in their role as consumers. When a consumer buys more of one good, he can afford less of other goods. When he spends more time enjoying leisure and less time working, he has lower income and can afford less consumption. When he spends more of his income in the present and saves less of it, he must accept a lower level of consumption in the future. The theory of consumer choice examines how con-sumers facing these tradeoffs make decisions and how they respond to changes in their environment. After developing the basic theory of consumer choice, we apply it to several questions about household decisions. In particular, we ask: ± Do all demand curves slope downward? ± How do wages affect labor supply?
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