1.2 rational decision making

Question 1

What is the underlying assumption of rational economic decision making

Answer 1

Consumers aim to maximise utility

Firms aim to maximise profits

Question 2

What does maximisation mean

Answer 2

occurs when an economic agent tries to obtain the most that they can from the economic activity that they undertake​

Question 3

How do households try to maximise

Answer 3

Households or consumers wish to maximise their utility or personal satisfaction​

Question 4

How do firms try to maximise

Answer 4

Firms wish to maximise their profits​

Question 5

How do governments try to maximise

Answer 5

Government wish to maximise the welfare of the population​

Question 6

What are economic objectives

Answer 6

Economic objectives are the use of resources in order to meet the goals of an economic agent over a period of time.​

Question 7

How do economic agents meet economic objectives

Answer 7

They meet these objectives by making use of the factors of production available to them​

Land, Labour, Capital and Enterprise​

Question 8

Which are 3 economic agents we learn

Answer 8

1. Households
2. Firms
3. Governement

Question 9

What are private benefits

Answer 9

Private benefits are those benefits that accrue to an individual or firm through economic activity.​

Question 10

What are 2 economic objectives of households

Answer 10

The maximisation of private benefit from consumption​

The maximisation of private benefit from Working.​

Question 11

How do households maxmise private benefits from working

Answer 11

seek to attain higher pay or better working conditions

Question 12

How do households maxmise private benefits from consumption

Answer 12

seek to attain the highest level of satisfaction available in their consumption of goods and services ​

Question 13

What are 4 economic objectives of firms

Answer 13

Profit maximisation​

Profit satisficing​

Sales maximisation​

Growth

Question 14

What is profit maximisation

Answer 14

Firms will seek to attain the highest level of profit available in their production of goods and services

Question 15

What is Profit satisficing

Answer 15

A level of profit below profit maximisation that satisfies the needs of the owners or managers of an organisation e.g. working less hours to enjoy more leisure time or behaving ethically​

Question 16

What is Sales maximisation​

Answer 16

Some firms will seek to maximise sales, possibly to gain market share​

Question 17

What is growth maximisation

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Answer 17

Some firms seek to maximise their growth potential e.g. through the takeover of other firms​