In This Chapter
Getting to grips with utility
Understanding how economists model a representative consumer
Looking at people’s buying preferences
Consumer choice is the backbone of market economies. Today you can choose to buy from among more items than at any time in the past, and people are certainly taking advantage of the opportunity. In the United States, consumer spending accounts for roughly 70 percent of Gross Domestic Product, which is a hefty $12.4 trillion expenditure. When you look at the importance of consumer spending in our economy, you quickly see why economists want to understand the consumer as much as possible.
Consumers are people with individual preferences, ideas, backgrounds, histories, identities, and all manner of complicated personalities that can make understanding what they like and don’t like difficult. This could be a problem if you want to understand what makes a person tick, but what we want to understand is how people, given those tastes and preferences, decide what to buy and how markets respond to consumers’ choices.