Theories Advantages
Utility - Use utility to track how
Theory consumers’ views of
products so that we can
understand consumer
behaviours
- Determine how well
goods and services provide
satisfaction to consumers.
Indifference - see how consumers respond
curve- when price changes.
budget line - determine whether goods are
theory substitutes or complements,
normal or inferior
Revealed
Preference
Theory
Disadvantages
- The numerical value to a
consumer's level of satisfaction
from a bundle may not be
accurate in reality.
- This is because the reason for
purchase decision can be a bit
complex; there are usually many
variables to consider.
- The theory represents 2 goods and
both goods cannot be considered
inferior in this theory.
- In reality, it is more complicated
because there are many variables.