1.2.10: Alternate Views Of Consumer Behaviour

Question 1

We assume that consumers act ________ to maximise ________. This is not always the case.

Answer 1

Rationally, utility.

Question 2

What are three ways that make consumers act irrationally?

Answer 2

•Influence of other people.
•Habitual behaviour.
•Consumer weakness at computation.

Question 3

What is computation?

Answer 3

Calculating.

Question 4

How does influence of other people cause consumers to act irrationally?

Answer 4

Individuals are influenced by social norms (in order fit in with society).
Consumers become reluctant to change their bias (even if it would be beneficial), as it goes against social norms.
Herding behaviour: when one copies the actions of a large group (e.g. stocking toilet paper).

Question 5

How does habitual behaviour cause consumers to act irrationally?

Answer 5

Habits reduce the time taken to do something.
Creates a barrier to decision making as they prevent consumers from considering an alternative (e.g. buying Heinz ketchup).
This includes addictions (e.g. drugs).

Question 6

How does consumer weakness at computation cause consumers to act irrationally?

Answer 6

Many customers don’t compare prices and may buy more expensive goods.
They can also make impulse purchases.
There is little consideration for long term effects.