CAS EC 101 Lecture Notes - Lecture 9: Shopping Bag, Economic Surplus, Dependent And Independent Variables
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But economists traditionally have used models of rational, self-interested consumers . The traditional model dont include the psychological factors that guide consumers. But traditional models have been useful for predicting consumer demand. Nowadays many economists work in the field of behavioral economics which incorporates economics and psychology. According to the classical model people consume in order to get satisfaction or utility. Different quantities of various goods and services provide different amounts of utility. Rational people want to purchase a combination of goods and services that maximize their utility. Within the constraints imposed by their income and wealth. Economists also use the neoclassical model which is more abstract and may be misleading. Suppose a consumer has a fixed income that she can spend. If she wants to maximize her utility, then she must think at the margin . She will try to get the most utility from dollar after dollar.
