ABSTRACT
Households seek in society comfort, use, and protection. (Michael Wetzstein)
At a very basic level, wantsmay be classified as comfort and protection, and households are able to purchase these wants by being useful to society. We provided a convenient way to represent consumer preferences for these wants in Chapter 2. The basic hypothesis is that a rational household will always choose a most preferred bundle from the set of feasible alternatives. This belief in utility maximization belongs to the Austrian School of thought,1 which holds that the maximization hypothesis is the fundamental axiom of human action that is known to be true a priori. This is a form of hedonism doctrine (the doctrine that pleasure is the chief good in life). The competitive market model, which is another element of the Austrian School, is often used as an argument for profit maximization. Firms that do not maximize profits are driven out of the market by competitive forces.
