Rational Decision-Making Theory

Consumer Choice Theory is a division of macroeconomics. It relates preferences to the expenditures incurred on consumption and to the consumer demand curves. It makes the analysis of how consumers maximize their consumption as it is measured by their preferences subject to restrictions on their expenses. The latter can be achieved through maximizing utility dependent on a user budget constraint. Consumption is different from production.The law of demand is dependent on the price of the goods (Cartwright, 2014). As the price of goods raises the rate of consumption falls even when the rate even when the consumer is financially compensated for the effect of high pricing. The latter brings about the effect of substitution. In any case, there is no compensation on the price rise. As such, this results in a reduction in the overall power to purchase and thus a further reduction the amount of quantity demanded. This results in the income effect. Notably, as an individual 's wealth increases, demand for different products also increases thus a shift in the demand curve higher to all probable prices.
Demand Curves

As a matter of fact, the optimal decision taken should result to the optimal utility. Notably, the Convention economic principles presume that individuals normally make rational decisions in their day to day to day activities (Altman, 2012). As a matter of fact, rational behavior does not necessarily imply that an individual receives the highest financial benefit. This is simply because the level of satisfaction gained could be solely based on the emotions of the decision maker. On the contrary, for a decision to be termed as rational, it should eliminate virtually all the emotional components that are involved in the decision-making process and focus more on the facts on the ground concerning the decision being made (Ariely,