The consumer

Here we will focus on the individual consumer and the characteristics that compel a consumer (to choose) to spend income on goods and services. The consumer experiences utility - a measure of satisfaction - with every purchase that he or she makes, and economists measure that utility in order to find a consumer's optimal rate of consumption. The Theory of Demand is derived from the Theory of Consumer Behavior presented here. An individual's demand function can be explained by two approaches that help illustrate personal preferences: utility analysis and indifference analysis. In the readings ahead, you will explore these concepts more fully.

Objectives

Upon successful completion of this unit, you will be able to:

• identify and describe the basic tenets of consumer theory through two alternate approaches: the utility analysis and the indifference analysis; and
• correlate the derivation of the theory of demand to the theory of consumer behavior.