Economic Assumptions

Question 1

what do economists assume

Answer 1

• consumers aim to maximise benefit
• businesses aim to maximise their profit

Question 2

what are the reasons why consumers may not always maximise their benefit in detail (3)

Answer 2

• some consumers may find it difficult because it is hard to quantify, express in numbers, the satisfaction gained from consumption, for example if a person were to choose between going out to dinner or buying his child a toy
• some consumers develop buying habits which have been passed on from maybe their parents or been influenced by social media, over a period of time consumers may be loyal to a particular brand even if other brands offer better prices
• also some consumers may be peer pressured or influenced by the actions of others, for example 59% of all children open the same bank account as their parents, or some people may want to buy apple iphones and not samsung the same as their friends

Question 3

what are the reasons why producers may not maximise their profit, in detail (4)

Answer 3

• the performance of some businesses may be influenced by other people in the organisation, usually owners do not make descisions and delegate people to make them, for example a sales dep may have a sales manager, instead of maximising profit he may maximise sales because he may got more commission from sales, however this will benefit the manager, not the compay
• some producers have alternate business objectives, for example some people may want financial security instead of profit maximisation, in order to only earn enough to help their lifestyle
• some are commercial enterprises which operate commercially but have a non-profit business objective in order to help a minority such as charities
• some of these enterprises are social, aiming to maximise improvements in human or environmental wellbeing