Summary: A discussion of the theory of consumer choice in economics, including an outline of consumer preferences and the axiomatic assumptions economists make about them, a discussion of the realism of these assumptions, and an explanation of how preferences are used to derive consumer utility functions and demand curves. These basic concepts are then applied to understand consumer behaviour in an analysis of substitution and income effects, complementary and substitute goods, and elasticity of demand. Recommended prerequisites include Episode 12: The Price System and Episode 16: Profits and Competition.
