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Modern microeconomics, specifically consumer theory, is based on utility theory—consumers maximize their utility.

Are there any alternative paradigms? What are the flaws/limitations in these approaches?

Answer 1

Answer:-
The theory of consumer choice describes how individuals maximize their satisaction from the consumption of goods and services with their limited income. An average consumer consumer increases his or her maximization and minimize the opportunity costs applicable to them.

People face trade off- To get one thing we must sacrifice the other, this is the logic behind the first principle. We cannot have the same choices at one time we have to forgone some thing. For an example if i go to the college i can study the economy and if dont i can go somewhere else. So we, the people face trade off. When comes to the consumers theory, the consumers also face the trade offs.

b). The cost of some thing is what you give upto get it (opportunity cost)- There is cost involved in the actions we forgone, take the previous example if i don't go to college for i may fail in the exam so it is the opportunity cost for not going to the college.

c). Rational people think at the margin- We all are takes the decision by looking at the margin. Where ever there is a margin people woul like to go there. For example a pen costs $5 in shop and $10 another shop, people will obviously go to the first shop.

d). People are responsive to incentives- This is because of people takes the decisons by comparing the costs and benefits of the action. For example, when the price of apples goes up people will tend to buy less of apple this is because the cost of buying the apple is higher.

e). Trade can make every one better off- The trade allows the countries to specialize in the sector they are better off . When the countries trade with each they will be better off than previously.

f). The markets are goods way to organize the economic activity- In the markets the goods and services got a price which represents the value assigned to them. The value is depends upon the demand and supply of the goods and services. In the market the firms and households decide that is the market forces of supply and demand determines what to produce and how to produce and for whom to produce.

g). Governments can sometimes improve the market outcomes- Some times the markets fails to achieve the equilibrium so the government interfere in the economy to bring the efficient outcome. The market failure is corrected through the government intervention

h). The country's standard of living depends on the ability to produce the goods and services- The more the goods and services produced by them the more the income they earn so obviously there is an increase in the social welfare and the standard of living

i). The prices rises when the government prints too much money- printing of the money leads to an increase in the supply of the money so there will be rise in the prices

j). The society has short run tarde off between the inflation and unemployment- When the inflation rises the unemployment falls and vice versa. This is explained with the phillips curve

The utility represents the satisfaction derived from the consumption of goods and service. The consumption is based on the utility they derive

Yes, a consumer always tries to maximize the satisfaction with his limited income