Final answer:
The economic-buyer theory posits that consumers make purchasing decisions based on a combination of their needs and wants, which are further influenced by their incomes and the prices of goods and services.
Step-by-step explanation:
The basic premise of economic-buyer theory is that consumers decide what to buy based on needs and wants. When considering the economic explanation of why people make different choices, it is understood that consumers' decisions are influenced by personal preferences, which include a range of needs and wants that drive demand for goods and services. Additionally, these choices are affected by their incomes, the prices of goods and services, and other situational factors such as where they live.
Understanding that consumers make choices about what goods and services to buy with their limited income, it is crucial to recognize that demand is not only about wanting something but also having the ability to pay for it. If there is no ability to pay, there is no effective demand. This concept is central in explaining the behavior of consumers in the marketplace.