Chapter 1 is short and preliminary. It consists of an introduction to the theory of individual decision making considered in an abstract setting. It introduces the decision maker and her choice problem, and it describes two related approaches to modeling her decisions. One, the preference-based approach, assumes that the decision maker has a preference relation over her set of possible choices that satisfies certain rationality axioms. The other, the choice-based approach, focuses directly on the decision maker’s choice behavior, imposing consistency restrictions that parallel the rationality axioms of the preference-based approach. The remaining chapters in Part One study individual decision making in explicitly economic contexts. It is common in microeconomics texts-and this text is no exception-to distinguish between two sets of agents in the economy: individual consumers and firms. Because individual consumers own and run firms and therefore ultimately determine a firm’s actions, they are in a sense the more fundamental element of an economic model. Hence, we begin our review of the theory of economic decision making with an examination of the consumption side of the economy.

Chapters 2 and 3 study the behavior of consumers in a market economy. Chapter 2 begins by describing the consumer’s decision problem and then introduces the concept of the consumer’s demand function. We then proceed to investigate the implications for the demand function of several natural properties of consumer demand. This investigation constitutes an analysis of consumer behavior in the spirit of the choice-based approach introduced in Chapter 1.