Application of Theory of Consumer Behavior

As already discussed earlier, the theory is an important tool to interpret and analyse demand curves. Apart from its usefulness as a theoretical tool, it can be applied to practical decision making. It can be useful in any situation where a person or organization has to allocate a fixed amount of money among alternative uses. This model is much more than a theory of consumer behaviour; it is a theory of rational choice. That is, it is a theory which indicates how rational choices should be made. The model helps to assess which factors are important to a decision maker and how these factors should be used or combined to make a decision.