2.2 Consumer Behaviour and Utility Theory

This lesson explores consumer behavior and how individuals make spending choices to maximise satisfaction within budget constraints. Key concepts include utility theory, total and marginal utility, diminishing marginal utility, and indifference curves. Understanding these principles helps predict consumer choices, market demand, and the trade-offs shaping economic decision-making.

Consumer behaviour examines how individuals make decisions to allocate their resources among various goods and services. Understanding these choices is essential for predicting how changes in prices, income, or preferences can influence market demand. Central to this study is the concept of utility, which refers to the satisfaction or pleasure that consumers derive from consuming goods and services.