What are the assumptions of consumer theory?

1. They are complete; that is, given any set of possible bundles of goods, the consumer is always capable of deciding which one is preferable to the others and then ranking them in terms of preference. 2. They are reflexive; it means that any bundle is at least as good as itself.

What are the three assumptions about consumer preferences?

The three fundamental assumptions about preferences are: Completeness: We say preferences are complete when a consumer can always say one of the following about two bundles: A is preferred to B, B is preferred to A or A is equally good as B.

What is the basic concept of consumer theory?

Consumer theory is the study of how people decide to spend their money based on their individual preferences and budget constraints. A branch of microeconomics, consumer theory shows how individuals make choices, subject to how much income they have available to spend and the prices of goods and services.

What is the transitivity assumption in consumer theory?

This assumption states that, logically, selections between goods are rational because of the transitivity statement, which posits that people always prefer goods in the following order: A is preferred to B, and B is preferred to C, so A is preferred to C.

How many theories of consumer Behaviour are there?

two types
There are two types of theories that explain consumer behavior – the traditional or old theories and modern or contemporary theories. The traditional theorists would believe that consumers behave mechanistically. Their views about consumers may be compared with that of the economic philosophers’ views.

What are the four views of consumer decision-making?

Consumer Decision Making refers to the process under which consumers go through in deciding what to purchase, including problem recognition, information searching, evaluation of alternatives, making the decision and post-purchase evaluation.

What are the assumptions of indifference curve analysis?

Assumptions of Indifference Curve Analysis: (1) The consumer acts rationally so as to maximise satisfaction. (2) There are two goods X and Y. (3) The consumer possesses complete information about the prices of the goods in the market.

What are the properties of indifference curve with diagram?

The four properties of indifference curves are: (1) indifference curves can never cross, (2) the farther out an indifference curve lies, the higher the utility it indicates, (3) indifference curves always slope downwards, and (4) indifference curves are convex.

Who made the consumer theory?

Martin Fishbein and Icek Ajzen originally conceived the theory of reasoned action: a consumer behavior theory that focuses on the relationship between marketing and the preexisting attitudes consumers bring to their purchasing decisions.

What is non-satiation assumption?

The assumption that a consumer will always benefit from additional consumption.

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