Description
Purpose of Assignment
Week 5 exposes students to subjects that are intended to whet their appetites for further study in economics. Students will use the theory of consumer choice and the impact of the concepts of asymmetric information, political economy, and behavior economics, to describe how consumers make economic decisions.
Assignment Steps
Scenario: You have been asked to assist your organization's marketing department to better understand how consumers make economic decisions.
Write a 1,050-word analysis including the following:
- The impact the theory of consumer choice has on:
- Demand curves
- Higher wages
- Higher interest rates
- The role asymmetric information has in many economic transactions.
- The Condorcet Paradox and Arrow's Impossibility Theorem in the political economy.
- People are not rational in behavior economics.
Cite a minimum of three peer-reviewed sources not including your textbook.
Format your paper consistent with APA guidelines.
Explanation & Answer
Attached.
1
Theory of Consumer Choice and Frontiers of Microeconomics
Kyle Williams
ECO 365
Professor’s name:
Date of submission:
2
Theory of Consumer Choice and Frontiers of Microeconomics
Consumer choice theory is a study that shows how people decide on their spending
alternatives considering that they have different budget constraints and values of utility that they
seek to get from the various products available in the market. (Mankiw, 2015) Hence knowledge
of consumer choice is essential to market departments in organizations. In this paper, I conduct
an analysis of consumer choice and its impact on microeconomic trends and theory of consumer
choice affects demand curves, higher interest rates, and higher wages. Further, the paper contains
an explanation of the role played by asymmetric information on economic transactions, the
Condorcet paradox and arrow’s impossibility theorem. Finally, I will discuss the irrational
behavior of human beings in economics.
Impact the theory of consumer choice on
Demand Curves
A product’s demand curve shows the willingness of a consumer to pay for a certain
quantity of the product and these curves originate from consumer choice theory. An increase in
price leads to the demand curve falling indicating a decrease in demand. A drop in price
increases the demand curve which increases the consumption and need for the product. The
decrease or increase in consumption illustrated in demand curves is the basis of the theory of
consumer choice. In some cases, despite the fall of prices of an item, consumers tend to purchase
less. Demand curve slopes downwards due to diminishing marginal utility, income and substitute
effect. The other impact of the theory of consumer choice on demand curve indicated by inverse
proportionality between...
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