Chapter 4 is entitled \'The Theory of Individual Behavior\', and much of the cha

Question

Chapter 4 is entitled 'The Theory of Individual Behavior', and much of the chapter is devoted to the use of indifference analysis to build a framework for demand theory. Indifference analysis goes to great lengths to explain consumer behavior and how consumers make choices between options available to them. The options they face include budget constraints, different preferences for risk, and a multitude of products and services from which to choose. If one steps back and looks at consumer behavior, it seems to be based upon a premise that is not actually stated in our book. That premise is that consumers behave rationally in their consumption expenditures. Do you believe consumers do behave rationally? Is so, how do you explain impulse buying, buying as a result of advertising or strong sales pitches, buying for purposes of conspicuous consumption, or buying to simply have something bigger and better than someone else? If consumers do not behave rationally, how can the theory in chapter 4 account for the above behavior? Is the theory still valid? If you think consumers do behave rationally, how can rational thinking explain the above behaviors? How do your thoughts impact, if at all, your opinion of the theory espoused in our text?

Explanation / Answer

Indifference analysis goes to great lengths to explain consumer behavior and how consumers make choices between options available to them. Determining optimality for rational behavior requires a quantifiable formulation of ... Illustrating the relativity of rationality: if one accepts a model in which ... of Weber) can be found in the critique of Etzioni (1988), who reframes thought on ... Humans are not rational by definition, but they can think and behave rationally

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