Which theory explains consumer behavior based on satisfaction from various combinations of goods?

Prepare for the CMT Level 2 Exam with our quiz. Study with flashcards and multiple choice questions, each with hints and explanations. Get ready to excel on your path to becoming a Chartered Market Technician!

Utility Theory is the correct choice as it fundamentally revolves around the concept of how consumers derive satisfaction or "utility" from the consumption of different combinations of goods and services. This theory posits that individuals make consumption choices based on the utility they expect to achieve from those choices, allowing them to maximize their overall satisfaction given their budget constraints.

In Utility Theory, consumers evaluate the benefit they receive from each option and compare combinations to optimize their satisfaction levels. This theoretical framework is crucial in understanding market demand and consumer preferences, as it embodies the principle that purchasing decisions are often made to achieve the highest possible satisfaction.

The other theories listed do not primarily focus on consumer satisfaction from combinations of goods. Behavioral Finance pertains to how psychological factors influence investors' decisions in financial markets. Prospect Theory describes how people make choices in scenarios involving risk and uncertainty, particularly how they perceive potential losses and gains. Anchoring Theory involves cognitive biases that affect decision-making based on initial reference points, rather than a direct evaluation of the utility from different commodities.

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