Preference Vs. Taste * Taste is a simply a general inclination. Taste is drawing distinctions between things such as styles, manners, consumer goods and works of art and relating to these * Preference involves a choice between options. Consumer preferences represent each individual's desires for goods and services, which translate to choices based on income or wealth combined with the consumer's time to define consumption activities.

Example: I have a taste for good wine. I have a preference (choose) for Cabernet over Merlot.

KEY POINTS * Changes in taste lead to increased or decreased demand, which is one factor that economists consider when looking at changes in demand.

* Consumer choice is a theory in microeconomics that connects preferences for goods and services to consumption expenditures and, therefore, consumer demand curves.

TERMS * budget constraint

The condition that constrains expenditure to income (for a person) or the value of exports to imports (for a state)
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Consumer Preferences
Consumer choice is a microeconomic theory connecting preferences for consumption goods and services to consumption expenditures. Consumer choice ultimately affects consumer demand curves. The link between personal preferences, consumption, and demand curves is one of the most closely studied relations in economics. Consumer choice theory is a way of analysing how consumers may achieve an equilibrium between their preferences and expenditures by maximizing utility as subject to consumer budget constraints.

Preferences represent individual desires for the consumption of goods and services, translating into consumer choices. These choices are based on income or wealth combined with the consumer's time to define consumption activities.
The fundamental theorem of demand states that the rate of consumption falls as the price of the