Question

Consumer choice theory assumes that consumers behave rationally. Provide an example of a consumer being irrational, and explain what property (completeness, transitivity, more is better) is being violated.

Answer 1

Consumer choice theory assumes that consumers behave rationally. This means that consumers are able to use logical thought rather than emotions to make decisions. A consumer always buys any goods and services from the market ligically, but in real world we often find that consumers takes such decisions which shows their irrationality.

For example if a consumer likes a particular brand of dress and he goes to a shop to buy that. He always prefers this particular beand over others i.e. his choice is complete. But actually when he goes to the shop he finds that there is a sale on other brand and to save money he may become indifferent between the two brands thinking that both are clothes and buys the other brand, this violates the property of completeness and hence the consumer becomes irrational.

Another example may be sometimes in order to buy any particular brand people purchase even if it is very costly as compared to another brand. So this shows that they could have got more quantity of the other brand for the same amount of money but they prefers less amount of a particular brand, this violates the property of more is better.