In short, people will make choices to maximize their own utility but subject to their budget constraint.
Do you have a specific question?
Can someone help me understand the theory of consumer behavior?
4 answers
I do but it is a long question.
Workers may be given a package of benefits that include basic and option items. Basic might be medical coverage, life insurance equal to a year's salary, vacation time based on legth of service and some retiement pay. But employees can use credits to choose additional benefits (i.e. full medical coverage, dental, eye care, more vacation time, etc). Using the theory of consumer behavior, how do you think flexible benefit packages would affect an employee's preference between higher wages and more benefits?
I don't understand how to tie the consumer behavior theory to this question. Thanks in advance.
Workers may be given a package of benefits that include basic and option items. Basic might be medical coverage, life insurance equal to a year's salary, vacation time based on legth of service and some retiement pay. But employees can use credits to choose additional benefits (i.e. full medical coverage, dental, eye care, more vacation time, etc). Using the theory of consumer behavior, how do you think flexible benefit packages would affect an employee's preference between higher wages and more benefits?
I don't understand how to tie the consumer behavior theory to this question. Thanks in advance.
As economyst said, "people will make choices that will maximize their own utility, but subject to their budget constraint."
Each employee will choose, based on his/her own circumstances. A single mother with an asthmatic child might opt for full benefits and sacrifice some of the salary. However a parent with a working spouse who has full benefits, might choose salary over benefits.
Each employee will choose, based on his/her own circumstances. A single mother with an asthmatic child might opt for full benefits and sacrifice some of the salary. However a parent with a working spouse who has full benefits, might choose salary over benefits.
Thanks