a. Briefly explain the economic theory of how consumers make consumption decisions. Specifically, what are the pieces of information consumers consider, and how is the decision made to purchase specific amounts of goods/services?
b. Using the theory you outlined in part (a), explain the logic behind the law of demand.
c. Distinguish between the income effect and the substitution effect.
d. Explain what would happen, if the income effect and the substitution effect were to offset one another exactly.