The main role of the consumer is to spend money. How much money she spends is primarily based on her income. How she spends it, however, depends on her needs and preferences. For instance, if she has $100 to spend, she might buy $75 worth of groceries and $25 worth of clothes. Or she might buy $50 worth of groceries and $50 worth of clothes. Her spending habits impact different sectors of the economy in different ways.
Utility is an economic term for a person's overall well-being and satisfaction. Consumers play a role in the economy by maximizing utility, which means allocating their scarce resources, such as limited time or money, most efficiently. Utility maximization is different for every person. Some purchase high-end cars; others find a bargain in the discount produce bin.
Author and economist Adam Smith wrote that when consumers act in a self-interested manner and maximize their utility, the nation as a whole also operates more efficiently. If consumers don't waste money on buying unnecessary goods, companies will not waste resources producing those goods.
James Gwartney and Richard Stroup, co-authors of “Economics: Public and Private Choice,” explain the law of diminishing marginal utility: As you consume more of the same good, you receive less utility. A starving person receives great satisfaction, or utility, from eating a large salad. However, the more salad he eats and the fuller he gets, the less satisfaction he receives from eating the food.
Economic consumer theory hinges on consumers making rational buying decisions. Though that's not always the case--consumers sometimes make irrational buying decisions out of fear or greed--the role is the always the same: to measure all possible outcomes of their choices and use this knowledge to make an informed decision.
Economists use the theory that consumers make rational purchasing decisions to forecast trends in the market. For example, a rise in the price of deli meat used to make sandwiches means economists will assume consumers will switch to eating something else.
Consumers weigh a choice against its opportunity cost. William Baumol and Alan Blinder, co-authors of the book “Microeconomics: Principles and Policy,” describe the opportunity cost as what a person gives up to pursue an action. The opportunity cost of going on vacation to Tahiti is not only the money itself, but everything else that money could have provided.