CONCLUSION DO PEOPLE REALLY THINK THIS WAY
The theory of consumer choice describes how people make decisions. As. we have seen, it has broad applicability. It can explain how a person chooses between Pepsi and pizza, work and leisure, consumption and saving, and on and on At this point, however, you might be tempted to treat the theory of consumer choice with some skepticism. After all, you are a consumer. You decide what to buy every time you walk into a store And you know that you do not decide by writing down budget constraints and indifference curves. Doesn’t this knowledge about your own decision making provide evidence against the theory The answer is no. The theory of consumer choice does not try to present a literal account of how people make decisions. It is a model. And as we first discussed in Chapter 2, models are not intended to be completely realistic The best way to view the theory of consumer choice is as a metaphor for how consumers make decisions. No consumer (except an occasional economist) goes through the explicit optimization envisioned in the theory. Yet consumers are aware that their choices are constrained by their financial resources. And given those constraints, they do the best they can to achieve the highest level of satisfaction. The theory of consumer choice tries to describe this implicit, psychological process in a way that permits explicit, economic analysis The proof of the pudding is in the eating. And the test of a theory is in its applications In the last section of this chapter, we applied the theory of consumer choice to three practical issues about the economy, If you take more advanced courses in economics, you will see that this theory provides the
framework for much additional analysis .
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