It relies on the assumption that consumers are rational and will buy the cheapest good.
We need to go beyond mere statistical regularities to understand,
for example, how the world of money affects the supply of goods
and services. We need to investigate how economics influences our
political choices, and how those choices that feed back to
economics. And we must recognize that economic behavior is
shaped not only by prices and regulation but also by social norms
that are woven into our psyche and influence our individual choices
– and, through those choices, the wellbeing of our communities,
countries, and the world.
Kaushik Basu in "The assumptions that underpin modern economics need reviewing. This is why." (3 Jan, 2020, WEF)
Professor of Economics, Cornell University
Using the Topic, Explanation, Evidence and Link structure, write a paragraph responding to this question.
Here's what a good one looks like (WAGOLL):
Consumer sovereignty describes how consumer preferences will ultimately determine what gets produced and distributed in the economy. The reality of this concept is limited however, as the economy is complex and presents a number of limiting factors on the theory. Not all consumers have access to the same levels of income and at times, they act irrationally in an economic sense. When Apple produced the first iPhone, they were not responding to consumers' preferences, they were innovating. Consumer sovereignty is not a dominate factor in today's globalised market and is limited in its ability to describe what consumers buy and what producers create.