Preferences
Also called: Tastes and preferences, likes · Topic: Consumer Behaviour, Demand and Elasticity · NCERT: Class 9, Ch 9 "The Price Puzzle: What Drives the Market"; Class 12, Ch 2 "Theory of Consumer Behaviour"
Meaning
Preferences are a consumer's likes and dislikes over the bundles of goods available to her. They let her rank bundles as better, worse or equally good. Two things together decide which bundle she chooses: her preferences, and what she can afford given prices and her income. Tastes and preferences are also a determinant of demand. A change in them shifts the whole demand curve, even when the price stays the same.
Example
Srivalli loves mangoes, so she does not switch to oranges even when oranges are cheaper. In another case, news that cold drinks may harm health changes buyers' preferences, and demand for cold drinks falls at every price.
Don't confuse with
- Budget constraint: this shows what she can buy with her income at current prices. Preferences show what she wants to buy.