Define and explain what an economist means by: (a) rational, and (b) utility. How are these...
Define and explain what an economist means by: (a) rational, and (b) utility. How are these concepts used in helping explain consumer purchase choices?
Homework Answers
Answer -
1 - Rational - When a consumer is rational he takes his buying decisions after considering each and every alternative. He takes into consideration the price of the product and also the price of the substitutes. Thus when he chooses the best among them , he is said to be rational.
2 - Utility - Utility can be defined as the want satisfying power of the commodity. Thus , a consumer chooses to use only that product which satisfies his wants and is useful. He also considers that the price of the product is valid as per its utility
Hence , a consumer is both rational as well as he wants to attain the maximum utility within the price that he spends. He chooses the best product out of different class of products , which is cheaper and meets all his requirements.
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