With Explicit Reference to the Role of Information, Evaluate the Extent to Which Economic Theory Improves Our Understanding of Consumer Choice

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With explicit reference to the role of information, evaluate the extent to which economic theory improves our understanding of consumer choice

As consumers, every day we are faced with decisions as to what products we need to consume in order to meet our daily needs and wants. However, there are many different consumers with many different preferences, tastes and paying capacities meaning there is a high demand for a variety of commodities which differ from one another. Due to a vast variety of products that are available of similar function it requires a consumer to choose one favoured item over the others. The specific choice made by a consumer is an interest to microeconomics as it explains the demand for products and services and is therefore vastly researched. The subject of interest in this assignment in particular is the role of information on the consumer choice as many of us are often surrounded with advertisements and opinions of family, friends and others. Consumer behaviour is a widely researched subject as it has value to the psychologists, those in the marketing business as well as the economists, especially to the neoclassical economists. The neoclassical economics has dominated the 20th century as the main school of thought when making economic policies and is still viewed as the mainstream school of thought today. The neoclassical theory of consumer choice links consumer behaviour and consumption to the demand curve, providing the producers with valuable information on which they can base the price and quantities of products. More specifically, the theory of consumer choice analyses how a consumer may achieve total level of satisfaction by consuming products or services subject to their budget constraint. In microeconomics, the satisfaction derived from using a product is often referred to as utility, and naturally consumers are seen as utility maximising agents (Edgeworth 1881). However, some argue that the term utility is too broad to...