Rational consumer
Also called: Rationality · Topic: Consumer Behaviour, Demand and Elasticity · NCERT: Class 12, Ch 2 "Theory of Consumer Behaviour"
Meaning
A rational consumer knows what is good or bad for her. From all the bundles she can afford, she always picks the one that gives her the most satisfaction. This assumption is the base of consumer theory. It lets economists predict choices and derive the demand curve. The behavioural view in the Economic Survey 2018-19 (chapter 2) questions it. That view points out that real people also follow habits, social norms and default options.
Example
With ₹20, a consumer can buy several bundles of bananas and mangoes that cost exactly ₹20. A rational consumer compares all of them and picks the one on her highest indifference curve. She does not pick a bundle at random, and she does not leave money unspent when more fruit would make her better off.
Don't confuse with
- Nudge (behavioural economics): this assumes people often do not act fully rationally. It uses defaults and social norms to guide their choices.