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Consumer theory is the study of how people decide to spend their money, given their preferences and budget constraints. A branch of microeconomics, consumer theory shows the process of decision-making, despite restrains such as their income and the prices of goods and services. Through consumer theory, we are better able to understand how individuals’ tastes and incomes influence the demand curve. These choices are among the most critical factors, shaping the overall economy. But how can an outsider predict how people are most likely to spend their money? Limitations exist. People are not always rational, for example, and occasionally they are indifferent to the choices available. Some decisions are particularly difficult to make, because consumers are not familiar with the products, or the decision has an emotional component that isn't able to be captured in an economic function.
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