Economic Assumptions

Question 1

What is an irrational?

Answer 1

Irrational - not based on clear thought of proof.

Question 2

What is an irrational?

Answer 2

Irrational - not based on clear thought of proof.

Question 3

What is an assumption?

Answer 3

Assumptions - things you think are true although you have no definite proof.

Question 4

What is a rational?

Answer 4

Rational - based on clear thought and reason.

Question 5

What is maximise?

Answer 5

Maximise - to increase something such as profit as much as possible.

Question 6

What is a revenue?

Answer 6

Revenue - money made from sales.

Question 7

What is a profit?

Answer 7

Profit - money left over once all costs have been paid.

Question 8

What are consumer assumptions?

Answer 8

Assumption - Consumers aim to maximise their benefits.

Question 9

In what situation might consumer assumption be wrong?

Answer 9

1. Consumers will always look for the best price
2. Best value
3. Best quality
4. Best customer service
5. Collect reviews
6. Health benefits

Question 10

4 main reasons consumers do not maximise their benefits:

Answer 10

1. They find it difficult to calculate the benefits of consuming a product
2. They have buying habits that make it difficult to make rational choices
3. They may be influenced by the behaviours of others
4. Consumers do not have access to all the information

Question 11

What is business/producer assumptions?

Answer 11

Assumption - businesses aim to maximise their profit.

Question 12

In what situation might business/producer assumption be wrong?

Answer 12

1. Charities
2. Caring for customers or high quality product — repeat business
3. Revenue maximise — to increase market share
4. Sales maximise — to increase market share

Question 13

What is the equation of profit, revenue and costs?

Answer 13

1. Profit = revenue - costs
2. Revenue = price * quantity sold
   Sales volume = quantity of sale