1.1.2 Economics Assumptions

Question 1

What do Consumers and Producers want to maximise for?

Answer 1

Consumers want to maximise their benefits, Producers maximise profit.

Question 2

Why do consumers not always maximise their benefit?

Answer 2

1. Consumers are myopic, they cannot see true benefit
2. Some consumers have buying habits
3. Consumers can copy common public behaviour

Question 3

Why do businesses not always maximise their profit?

Answer 3

1. They have a social objective
2. Managers may be revenue driven or sales driven
3. businesses may prioritise customer satisfaction