The principle of Rational Consumer Choice


Microeconomics is the branch of economics which analyzes how human beings satisfy their unlimited wants using limited resources. The infinite nature is a significant characteristic of human desires which presents an economic problem on the consumers. The theory of opportunity cost tries to analyze how individuals forego the consumption of a specific product to enable them to consume another product with a high priority. The production resources, on the other hand, are limited and scarce. The inadequate allocation of resources has led to the principle of rational consumer choice. According to this principle, consumers prefer the consumption of goods that enable them to maximize their utility (Kreps, 2018). In microeconomics, the efficiency is determined by the degree in which the product offers the customer with maximum satisfaction. The consumer, therefore, is faced with a problem of choosing the bundle of goods that can efficiently satisfy their needs at the lowest costs possible. The theory of rational consumer choice affects the consumption choices that individuals make thus affecting the demand for products in the market. This paper examines the theory of consumer choice by analyzing the beef packages that are offered by beef restaurants in the United States.

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Consumer Problem

Harris Ranch provides a festive season offer on the purchases of two similar beef packages. The two packages include The Ultimate and The Executive beef packages. The administration of the ranch has discounted the prices for the purchase of the two favorite beef packages to increase the demand for the two meals. Both meals are highly desired by the customers of Harris Ranch who are indifferent about which package to purchase during their family dinner meals. Majority of the customers, therefore, find themselves buying both packages in specific quantities to enable them to achieve maximum satisfaction from the consumption of the beef. The beef packages are examples of homologous products in the market which affect consumer behavior. The use of homologous goods affects the quantity of a specific product that can be consumed at a particular time subject to the budget constraint.
According to the law of demand and supply, Decrease in the prices of commodity results in an increase in the number of goods demanded. The offer provided by the restaurant takes advantage of the laws of demand through a reduction in the prices of the beef packages that are supplied on offer. The customers budget constraint on the other hand only allows the consumer to be willing and able to pay for specific quantities of the products (Varian, 2014). The individual’s indifference curves determine portions of products of each package that the consumer chooses. A consumers indifference curves in microeconomics represents the set of products that can enable an individual to maximize their utility. The set of bundles in the case of the offer provided by the Harris Ranch restaurant comprises of homologous goods that are slightly differentiated to provide different taste and preferences.

Graphical Presentation

The Ultimate beef package can be represented by good (x), while The Executive beef package can be represented by good (y). These goods are homologous; however, every product has a specific price that affects the demand of the product. The indifference curves portray the quantities of goods which maximize the consumer’s utility at a particular cost. The curve can be plotted on a graph to determine the effect of consumer choice theory on the number of goods and services that are demanded in the market.

Indifference curves of good (x) and good (y)


Good (x) – The Ultimate beef package

Good (y) – The Executive beef package

Graph 1: Graph of the indifference curves of Good (x) and Good (y)


The prices of the products on offer are determined and set by the management of the restaurant. Different amounts of good (x) and good (y) can be consumed to provide the customer with their preferred utility. The different values of products are presented by the indifference curve 1, 2, and 3. However, the consumption behavior of the customers also depends on the individuals budget constraint. The budget constraint can be represented by a horizontal line that touches the most preferred set of the bundle that maximizes the customer’s utility. In the graphical representation above, the individuals budget constraint is depicted by the horizontal line (BC) which touches the most preferred indifference curve (I2) at a particular point. The first indifferent curve (I1) represents a favorite set of a bundle that can maximize consumers utility but is below the budget constraint. The third indifference curve, on the other hand, represents the package of goods that maximizes efficiency but is above the budget of the customer. The second indifferent curve, therefore, represents the individuals choice of consumption if presented with an offer of homologous goods. The theory of consumer choice, thus, determines the number of products consumed by individuals with the primary objective of utility maximization. In the graphical representation above, the quantities of goods (x) and (y) consumed by the customers is portrayed by (x*) and (y*).


The offer provided by the Harris Ranch restaurant, therefore, presents the customers with a consumption problem. The consumption of homologous goods is determined by the level of utility associated with the product subject to the budget constraint. The customers of the restaurant can, therefore, maximize their efficiency through the purchase of (x*) units of the Ultimate beef package and (y*) units of the executive beef package. Homologous products are therefore very competitive because they provide consumers with relatively equal levels of satisfaction due to their similar nature. The differences in the units of goods consumed results from the secondary factors that affect the demand for goods in the market. These secondary factors include the taste and preferences of the products, the age of the consumers, their gender, specific seasons and nature of events happening in the restaurant.


The theory of consumer choice plays a significant role in determining the consumption behavior of individuals. The theory suggests that individuals consume products that provide them with maximum levels of satisfaction. The consumption behavior of homologous products is determined through the use of indifference curves subject to the budget constraint.



Kreps, D., 2018. Notes on the Theory of Choice. Routledge.

Varian, H.R., 2014. Intermediate microeconomics with calculus: a modern approach. WW Norton & Company.