The theory of consumer choice:
A)describes how a consumer chooses between different budget constraints.
B)describes how a consumer chooses between different income levels.
C)describes how a consumer allocates her limited income among available goods and services.
D)describes how a consumer allocates her limited preferences among available income levels.

Question

Quizplus · Accepted Answer

The theory of consumer choice is concerned with the allocation of limited income among available goods and services, as consumers have to make choices on what to buy and what to forego due to the constraints they face. It explains the decision-making process of consumers based on their preferences and budget constraints, and how they make rational choices to maximize their satisfaction or utility. Therefore, choice letter C, which describes how a consumer allocates her limited income among available goods and services, is the best answer. The theory of consumer choice deals with how a consumer allocates her limited income among available goods and services. It analyzes how consumers make decisions by comparing the utility they derive from consuming different combinations of goods and services with the prices and income constraints they face. It is not about choosing between different budget constraints or income levels, nor is it about allocating preferences among different income levels.

The Theory of Consumer Choice