Introduction

Abstract

The conventional consumption theory that is found in most textbooks on microeconomics is a part of demand theory and as such belongs to positive economics, but it also forms part of welfare economics, which is concerned with prescriptive or normative issues.¹ Indeed, with regard to this latter function, it is possible to argue that,

The entire edifice of normative or welfare economics rests on consumers’ sovereignty, i.e. the assumption that individuals know what is best for them; that they make unconstrained decisions in the market; and that this will lead to maximum welfare not just for the individuals but also for society. Maximising consumer welfare thus provides the ultimate basis of every normative prescription in economics, including those about optimum trade policies, cost/benefit analysis, price regulation and so on. This is the foundation stone for the justification of the market model, with consumption as the driving force of the economic system. (Stewart, 1997: 1)