How do individuals decide that what to consume or produce? How they decide that this choice is optimal?

Answer 1

Utility, whatever choice brings them more happiness

Answer 2

Thats whats called "utility". Utility, for general goods and services, is generally the optimal function of price, quantity and quality that gives each person maximum happiness. Economics relies on the principle that every consumer naturally makes the most rational choice for themselves. Every person of course decides their own optimal choice, but it usually comes down to some combination of these factors.

Answer 3

They don't, they are just walking by the vending machine and the candy forces them to buy it and consume it. What they produce is involuntary too, like after eating beans. Seldom do they make an optimal choice, it would take too much time. Sometimes good enough is good enough, not optimal. Good luck on your homework.

Answer 4

The combination of consumption choices which maximizes your "utility" Utility in economics measures satisfaction. You know you have maximized satisfaction with a given budget constraint when for the last dollar spent, the marginal utility of all products is equal or "balanced". In other words you got "the most bang for your bucks".

Answer 5

it rather is a organic microeconomics question. at first, you ought to anticipate that each and every man or woman is a application maximizer and a rational selection maker. it rather is a sort man or woman and it rather is observed as "Homo Economicus". then you certainly anticipate that each and every given man or woman has a indifference map, this is a map of indifference curves. those indifference curves prepare distinctive bundles of goods, each and every measured as to volume, to which a shopper is indifferent. this is, at each and every factor on the curve, the shopper has no selection for one kit over yet another. those curves are in the 1st quadrant, downward sloping, convex, and one curve can not bypass the different. the different factor you need to be attentive to is the fee selection constraint. this is rather a popular-diploma equation the place x and y are 2 products, px and py are the fees of those products, and w is your wealth. while optimizing your selection, you pick a factor the place W = x*Px + y*Py. Your optimal factor of intake is hence while the fee selection constraint is tangent on your corresponding indifference curve. this is, the slope of the fee selection constraint must be equivalent to the slope of the indifference curve. i.e., the ratio of marginal application of sturdy x (the applying you get from one greater unit of x) to marginal application of sturdy y must be equivalent to the fee ratio of those products.