Consumer theory provides the foundation for understanding demand curves because
A)each point on a demand curve represents an optimal choice point.
B)consumers purchase more inferior goods than normal goods.
C)increases in income cause the budget constraint to rotate inward along one axis, which changes the consumer's purchases.
D)increases in income cause the budget constraint to rotate outward along one axis, which changes the consumer's purchases.

Question

Quizplus · Accepted Answer

Consumer theory is based on the idea that consumers make rational choices in order to maximize their satisfaction or utility, given their budget constraint. Each point on a demand curve represents an optimal choice point where the consumer has chosen the combination of goods that makes them the most satisfied given their budget constraint. Therefore, consumer theory provides the foundation for understanding demand curves because it explains why consumers make the choices they do and how these choices are reflected in the demand curve.

Consumer Theory Provides the Foundation for Understanding Demand Curves Because