Economic assumptions

Question 1

What are the 2 underlying economic assumptions?

Answer 1

-Consumers aim to maximise benefit
-Businesses aim to maximise profit

Question 2

What does maximising benefit mean? Give an example.

Answer 2

The course of action which will give most satisfaction.

Buying a cheaper alternative or buying a product with better quality at a same price

Question 3

What are the reasons why consumers may not maximise benefit?

Answer 3

-It is possible that some consumers have difficulty calculating the benefits from consuming a product

-Some consumers develop buying habits

Question 4

Why might businesses not maximise their profit?

Answer 4

-The behaviour of other people in the orginisation

-Some producers may have alternative business objectives

-Business morals like charities