Theory of Consumer Choice

Front

What is the goal of consumers according to the Rational Choice theory?

Back

To maximize utility subject to their budget constraints.

Front

What factors influence consumer choices?

Back

Preferences, constraints, and available information.

Front

What do indifference curves represent?

Back

Consumer preferences.

Front

What does the budget line show?

Back

The feasible set of choices for consumers.

Front

What is asymmetric information?

Back

When one party has more or better information than the other, leading to market inefficiencies.

Front

What is moral hazard?

Back

When one party takes more risks because they do not bear the full cost of their actions.

Front

What is adverse selection?

Back

When one party has more information about a product than another, leading to market imbalance.