Final answer:
Consumer choice theory posits that individuals make consumption choices aiming to achieve the highest utility within their budget constraints. This basic principle considers not only personal tastes but also income, prices, and living conditions.
Step-by-step explanation:
The basic principle of consumer choice theory is that people make choices based on their desire to achieve the highest level of utility or satisfaction from their consumption. This is true. While personal preferences play a role, choice theory considers other factors such as income levels, the prices of goods and services, and the consumer's living situation. Essentially, with the limited resources at a consumer's disposal, they aim to maximize their utility.
Economists assert that each additional unit of consumption generally provides less utility than the previous one, a concept known as the law of diminishing marginal utility. As consumers purchase more of a good, the added satisfaction from each subsequent unit declines. Therefore, consumer choice reflects a balance between the pursuit of utility and the constraints of the budget, with consumers aiming to reach the most favorable tradeoffs.