A measure of the satisfaction that we get from purchasing and consuming a good or service.
Rational Choice
Making choices based on the additional benefits and the costs to maximise utility
Utility Maximisation
The assumption that consumers behave rationally in allocating their income between different products to maximise utility from their purchases.
Computational Weakness
When consumers find it difficult to calculate the probability of something happening when making purchasing decisions
Habitual Consumption
When people have strong default choices because they don’t involve much effort. Incentives like government intervention through taxes and subsidies may change behaviours
Herd Behaviour
When individuals in a group act collectively without centralised direction
Reasons for Irrational Behaviour
Inertia, computational weakness and the influence of others
