1.2.1 Rational decision making

Question 1

Consumer aims to maximise utility

Answer 1

-Utility refers to satisfaction/well-being individuals derive from consuming g+s
-Rational consumers are assumed to seek to maximise overall utility from consumption choices
-cost-benefit analysis

Question 2

Firms aim to maximise profits

Answer 2

-Revenue-cost
-Rational firms aim to maximise profits to ensure business stability and growth

Question 3

Consumer decision making

Answer 3

-Based on preferences and budget constraints
-Allocate budget to maximise satisfaction

-e.g. evaluate factors like price, features, brand

Question 4

Firm decision making

Answer 4

-Produce to meet consumer demand
-Adjust pricing levels and pricing to achieve highest profit