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Economics

  • By: Chris R. Birchenhall
  • In: Encyclopedia of Consumer Culture
  • Edited by: Dale Southerton
  • Subject:Sociology of Consumption, Consumer Psychology, Consumer Culture

Most economic literature assumes that consumers are rational, that is to say, that they choose optimal combinations of goods. To model this core paradigm, we have to identify the constraints on consumers and find ways to characterize the best choice given these constraints. The classic paradigm focuses on the case where there is only one constraint, namely, the budget. The consumer has a budget, that is, a certain amount of money to spend, and thus can buy any combination of goods whose total cost does not exceed the budget. Usually the prices of goods are taken as given and cannot be changed by the consumer and are not influenced by an individual consumer's choice. In this way, the total cost of any combination of goods ...

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