Behavioural Theory of Consumer Choice and its Macroeconomic Significance
This paper clarifies some concepts connected with the consumer choice theory in the light of behavioural economics. It explains the meaning of behavioural economics (the science of economic behaviour) with reference to the consumer’s economic choice and highlights the complementary nature of these two theories and their macroeconomic significance. The purpose of this paper is to underline the complementary nature of the classical consumer choice theory and behavioural economics. It also attempts to provide a theoretical explanation for the influence of the ratchet effect in macroeconomics using tools proposed by behavioural economics (BE). Towards this end use was made of the research results included in the book “Animal Instincts” by George Akerlof and Robert Shiller, which depicts behaviours that derive from the consumer mind and impact the domain of macroeconomics. The considerations presented in the paper indicate that the application of behavioural economics enhances our ability to explain issues that are treated by mainstream economics as being of lesser importance.
Keywords - Behavioural Economics, Consumer Choice Theory, Macroeconomics.