Economic Assumptions Flashcards
(8 cards)
When making economic decisions, what do economists assume about the consumer?
The consumer will always choose the action that gives them the greatest satisfaction
What assumption do we make about businesses?
Businesses will choose a course of action that will maximise the most profit.
What is computational weakness?
It is when consumers have difficult in calculating the benefits of consuming a product.
What is a Habitual behaviour
Some consumers develop buying habits that can affect their ability to make rational choices.
-> Businesses can also take advantage of this and develop brand loyalty through marketing.
What is Herding?
Consumers might be influenced by the behaviour of others. Purchases are influenced by friends.
When might business choose not to maximise profit?
If they are a charity -> Aim to raise awareness and money for a cause
Environmental friendly organisations
Formula of Revenue?
Price x Quantity
