Actions for Discussion Activity 6 Consumers are expected to

Actions for Discussion Activity #6 Consumers are expected to make “rational\" decisions in allocating their money incomes when they purchase various goods and services, in order to maximize satisfaction (utility). As a college student, what decisions do you usually make in order to maximize your satisfaction and ensure that you remain within your budget? Do you think that (most)consumers always act rationally? Why or why not?

Solution

As a college student one decides whether to allocate the budget or the pocket money received between buying stationary goods like books, all items of study and entertainment like buying movie tickets, going for music concerts. The indifference curve of all are different depending upon their preferences and they allocate their income accordingly. Those who are fond of studying allocate more income in buying study material and those who are fond of entertainment will spend more on entertainment.

Consumers act rationally is the major assumption of economics on which most of the theories of economics are based. It has been observed that most of the times consumers act rationally and allocate their resources optimally to achieve maximum satisfaction but sometimes they might not act rationally.