Rational consumers make choices with the aim of maximising utility (satisfaction or benefit) from purchasing and consuming goods and services using a limited amount of income (their "budget"). The "rational choice model" used in economic theory assumes the following.
Consumers choose independently
A consumer has fixed and consistent tastes and preferences
Consumers gather complete and perfect information
Consumers always make an optimal choice
Maximising utility
Utility measures the satisfaction we get from purchasing and consuming a product. Most economists assume that all 'economic agents' (i.e. consumers, producers, etc.) aim to maximise their utility. For businesses, this means maximising their profit.
Total utility
The total satisfaction from a given level of consumption
Marginal utility
The change in satisfaction from consuming a extra unit
Diminishing marginal utility
Standard theory believes in diminishing marginal utility i.e. the marginal utility of extra units decline as more is consumed.
