Final answer:
Consumer preferences in the theory of consumer behavior are based on subjective tastes and influenced by factors like income and prices. The law of diminishing marginal utility states that the additional utility from consuming each unit of a good tends to decline.
Step-by-step explanation:
In the theory of consumer behavior, we assume that each consumer has subjective preferences for specific goods and services that are available in the market. These preferences are influenced by factors such as personal tastes, incomes, prices of goods, and location. Economists believe that consumers seek the highest level of utility or satisfaction from their consumption choices. It is important to note that the additional utility a consumer receives from consuming each unit of a good tends to decline, a concept known as the law of diminishing marginal utility.