1.2.10 Alternative Views of Consumer Behaviour

Question 1

Influence of other people’s behaviour

Answer 1

Where consumers are influenced by what others do and copy. Can be referred to as a “herd like mentality”.

Question 2

Habitual behaviour

Answer 2

Where consumers prefer what they know and have rather than taking a risk where there is more uncertainty. Referred to as “customer inertia”.

Question 3

Computational difficulties

Answer 3

Where customers have difficulty in calculating the best buy.

Question 4

Diminishing marginal utility

Answer 4

As successive units of a good are consumed, the utility gained from each extra unit will fall.

Question 5

Imperfect market information

Answer 5

Where consumers do not possess full market knowledge on which to base their decisions.

Question 6

Deductive approach

Answer 6

Where economic models are created on the basis of how consumers are expected to behave.

Question 7

Inductive approach

Answer 7

Investigates how consumers actually behave and then models are developed based on the results.