Consumer Choices

What is Consumer Choice?

Consumer choice is the choice of a consumer to buy a product or not. Usually, consumption or the behavior to buy products increase with increasing income. Moreover, it also depends on the happiness the consumer derives out of the product he/she buys.

In other words, a consumer will choose to buy a product if his budget exceeds the price of the product. Typically, when incomes increase, the budgets for consumption increase automatically. However, utility or the satisfaction derived from buying a product does not necessarily increase with increasing incomes. In fact, the utility may be related to a lot of factors, such as geography, climate, cultural factors, and personal choices of consumers.

In microeconomics, the theory of consumer choices connects the preferences of consumers to consumption and consumer demand curves. While considering consumer choices, production and consumption are considered two different aspects. This is so because the two different economic agents are involved in the two.

For example, in consumption, the consumer experiences the taste of the product but in production, the producer may not have the experience of using the product.

Example of Consumer Choice

The examples of consumer choices are aplenty because every person has to make these decisions all the time while spending their money. As the occasions of spending money are numerous and different in nature, there are many instances in everyone’s life where they have to make a choice.

Here’s one example.

Suppose you have Rs 100 with you which is left after buying a box of chocolates that you bought to satiate your hunger. However, after buying the box you suddenly see an item in the same store that can satiate your hunger more effectively. For example, if you have bought a chocolate box from a restaurant and after buying it, you saw a plate of hot rice, it will not take much time to change your mind. You might realize that it is better to consume rice than chocolates at a particular time, you may be ready to pay even more to get the kind of satisfaction you want to derive from the food.

Now, you will first check whether you have Rs 150 which is the price of the rice plate in your pocket. If you find that you only have Rs 60 or so, you will decide to return the box of chocolates and pay the extra Rs 50 for the rice plate. In making this decision, you are actively using the two factors that are used in making consumer choices. The first is the budget that you may afford and the second is the utility that may provide you more satisfaction for consuming the item you buy.

Types of Consumption

  • Direct Consumption: When the commodities consumed are for human want and they are consumed directly, it is called direct consumption. Examples include foods and beverages, toys, etc.

  • Productive Consumption: When a commodity is consumed in the production of another product, such consumption is known as productive consumption.

    For example, the use of soda for the production of soaps. Productive consumption is also called indirect consumption.

  • Slow Consumption: The type of consumption of commodities that remain effective for a long period of time is known as slow consumption. The use of consumer durables, electronics, etc., falls in this category.

  • Quick Consumption: The consumption of commodities that last only for a moment is called quick consumption. Consumption of single-use goods, such as tea, and coffee falls in this category.

  • Wasteful Consumption: The consumption of commodities that lead to the creation of waste or useless items is known as wasteful consumption. Examples include the use of mirrors that break down due to mishandling.

How Do Income, Prices, and Preferences Affect Consumer Choices?


The budget constraints effects in consumer choices are usually expressed with two products on the vertical and horizontal axes. Depending on the rise of the income usually, an increase in consumption of both goods is observed in a comparison budget line of two products. Similarly, a drop in income leads to a drop in consumption of both goods. Goods and services that show such trends are known as normal goods.

In the case of inferior goods, however, people trim the expenditure on goods and services they availed previously with an increase in incomes. Such behavior is observed because, with a higher income, people can opt for costlier products.


Usually, an increase in prices leads to the consumption of one or both goods in the case of normal goods. There are two effects that are mainly responsible for this. The substitution effect occurs when people buy less of the product the price of which has increased and more of that the price of which hasn’t.

The income effect takes place when the purchasing capability of the buyer goes down which leads to a cut in the buying behavior of both the items.


According to the completeness assumption of preferences, the buyers will tend to buy products they like irrespective of income and price factors. The consumer is usually capable to say which of the two items he prefers more.

According to the assumption of transitivity, if a consumer prefers good X over good Y, and good Y over good Z, then he/she will automatically prefer good X over good Z.

The assumption of non-satiation on the other hand relies on the fact that more of any good is better until it affects the consumer’s capability to utilize all other services or goods.


Consumer choice plays an important role in our day-to-day lives. As is obvious, it is a central subject to economics depending on which the consumption and use of goods and services take place. Consumer choice determines the competition and quality of goods that are produced and sold in the market. In that sense, it is the running force of all economies. Without consumer choices, there would be no variety or additional choices for any product in the market. That is why it is an important branch of study in economics.


Qns 1. What is the Consumer Choice Meaning?

Ans. Consumer choice is the set of decisions consumers make about the goods and services they consume over time. Studying consumer choice behavior leads to the identification of products that consumers buy or consume, why they consume more of some items over others, and what makes consumers look for some goods more than others.

Qns 2. What is the Link between Consumer Choice and Marginal Utility?

Ans. According to microeconomics, consumers constantly compare marginal utility from consuming the additional products. They compare this utility to the cost incurred while acquiring such goods. The marginal utility must exceed the price for a consumer to make a decision of purchase.

Qns 3. What is the Goal of Consumer Choice?

Ans. The goal of consumer choice is to get an optimum allocation of funds to get the maximum utility between two goods or services. Consumers must purchase products that fall within their budget line and has the maximum marginal utility.


Simply Easy Learning

Updated on: 13-Oct-2022

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