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Consumer Theory

Where does the demand curve come from?

In order to explain why individuals choose different quantities at different prices, we will use a model with three components:

1- Consumers have certain restrictions on how they can choose. Most importantly, they have a budget, but there can also be other restrictions.

2- Individual preferences (or tastes) determine how satisfied an individual will be with different combinations of goods and/or services. We measure the level of satisfaction in terms of utility.