Theory of the Consumer

The study of the economic behaviour of the individual consumer is a prequel to the

study of demand for goods and services in the product (commodities) market. This is

utility theory which goes back to first principles. The theories provide the foundation

for the law of demand, indicating how and why consumers respond in particular ways

to the structure of incentives and various other factors (prices, income, tastes) in the

market. An understanding of consumer behaviour and how consumers optimize within

budget constraints is useful, particularly to sellers in their quest for market advantage

and greater competitiveness.