Economic assumptions Flashcards
What do consumers aim to maximize?
Consumers aim to maximize their utility or satisfaction from the goods and services they purchase.
What does utility refer to?
Utility refers to the pleasure or benefit derived from consuming a good or service.
How do consumers choose goods?
Consumers choose goods that provide the highest personal benefit.
What is the goal of businesses?
Businesses aim for profit maximization, which is the goal of achieving the highest possible profit.
How is profit defined?
Profit is the difference between total revenue and total costs.
What decisions do producers make to maximize profits?
Producers make decisions on production levels, pricing, and resource allocation.
Why might consumers not maximize their benefit?
Consumers may not maximize their benefit due to various reasons.
What is one reason consumers may not maximize their benefits?
Consumers are not always good at calculating their benefits.
What can lead to irrational decision-making in consumers?
Lack of knowledge or ability to calculate the true value or benefit of different choices can lead to irrational decision-making.
What is another reason consumers may not maximize their benefits?
Consumers have habits that are hard to give up.
What might influence consumers to stick to familiar products?
Brand loyalty or habit can lead consumers to stick to familiar products, even if better alternatives exist.
What is a third reason consumers may not maximize their benefits?
Consumers sometimes copy others’ behavior.
What can lead to less optimal decisions in consumers?
Social influence or peer pressure can lead consumers to make choices based on what others are doing.
