Theory Of Consumers Choice And Frontiers Of Microeconomics

Theory of Consumers Choice and Frontiers of Microeconomics The consumer’s choice theory studies how consumers make decisions and how they respond to changes in the environment (Mankiw, 2015). In today’s society, there are many changes, and as the years go on and innovations come forth, people are bound to change the way they live their life. As firms produce new and improved products, consumers will continue to buy into them. With the change in economy, people are known to make decisions based on their budgets, their needs, and their wants (Mankiw, 2015). Consumers are supposed to make economically rational decisions, maximizing their pleasures, but consumers are not rational at all (Thompson, 2013). The Impact on Demand Curves People can be surprising, the economy is thought to think and make decisions based on personal interests. With those decisions, it tends to impact the demand curve. The demand curve shows how the demand for a good or service varies when there is a change in price. It can be calculated by the willingness of the consumer in purchasing those products (â€Å"Impact of Price on Consumer Choices†, 2016). As the firms raise prices on their products to afford production costs and other expenses, consumers will tend to purchase less, creating a downward slope. As mentioned earlier, people can be surprising. A demand curve has had a surprising upward slope, when consumers purchase more products, as the prices increase (Mankiw, 2015). With a steady economyShow MoreRelatedEconomics As An Area Of Study And Research1372 Words   |  6 Pagesvarious economic factors that determine how economies work (Marshall 2004). Understanding of economics calls for the division of the subject into two main branches. The areas are microeconomics and macroeconomics. Microeconomics is the basic form of economics in the society. 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