ABSTRACT
This chapter focuses on consumers and how they think in complex situations and the behavior of the actors in the supply side of the market. As with the consumer model, mainstream economists view suppliers as rational maximizers who make optimal, informed decisions. The chapter provides examples of a Veblen good and also focuses on the less predictable, less competitive side of markets, and some of the complexities related to consumer and producer behavior. It analyzes how pecuniary emulation and herd behavior affect consumer decisions and examines how households, communities, and cultures shape consumer decisions. The chapter utilizes a table containing information on labor and output to compute the marginal product of labor, total variable cost, marginal cost, and average variable cost. It examines how behavioral economists and political economists analyze supply decisions, and apply the ideas of satisficing, competition for innovation and monopoly power, and countervailing power to supply decisions.
