Consumer behavior

In this chapter we apply the model of individual choice presented in Chapter 2 to the behavior of a consumer. The set X of all alternatives the consumer may face is R2+, the set of bundles, and a choice problem is a subset of X. As we discussed in Chapter 2, to completely describe an individual’s behavior we need to specify her choice for every choice problem she may face. Not every subset of X is a choice problem for a consumer. Since we are interested in the connection between prices and the consumer’s choices, we focus on the behavior of a consumer who faces a particular type of choice problem, called a budget set.