economics unit 1 aos 3

Question 1

Traditional Economic viewpoints about consumers

Answer 1

• behave rationally
• are self interested and selfish
• want to maximise gains and pleasure or utility
• dislike pain
• have ordered priorities
• have perfect knowledge or information relating to the decision
• do not act on impluse

Question 2

Behavioural Economics

Answer 2

is a study that examines the factors that influence the way consumers and producers respond or interact. people’s behaviour is affected by peoples psychological, emotional, cognitive, social and cultural factors. They take shortcuts such as adopting her behaviour or applying the status quo. This occurs because we have. for example, limited time to complete research and inadequate brainpower to weigh up all the possibilities.

Question 3

Bounded rationality

Answer 3

consumers take short-cuts in making economic decisions by following the status quo or adopting herd behaviour, for example, because they lack time, don’t have access to all information or have analytical skills to weigh up the evidence.

Question 4

Bounded willpower

Answer 4

consumers do not have the necessary willpower or determination to avoid temptation. which may not be in their best long-term interest and may later regret their decisions.

Question 5

Bounded self-interest

Answer 5

consumers can be selfish, this is not always the case. There decisions can be affected by other beliefs like fairness and a desire to help others.

Question 6

Efficient allocation of resources

Answer 6

occurs when productive inputs are used in a way that maximse the overall satisfaction of society’s needs and wants.

Question 7

Material living standards

Answer 7

Material living standards refer to our access to physical goods and services.

Question 8

Non-material living standards

Answer 8

factors that affect a person’s quality of life irrespective of income.

Question 9

Examples of policies

Answer 9

• excise taxes on alcohol and tabacco
  -random breathing tests for drivers
  (financial disencintives)

Question 10

Multi-branding

Answer 10

is a common selling strategy where one company owns others, with different names, even though they may produce similar products out of the one factory

Question 11

Nudge

Answer 11

marketing idea that involves providing a gentle reminder that seeks to alter people behaviour in a predictable and wanted way, without forcibly limiting their choice.

Question 12

Marketing

Answer 12

includes a range of strategies that businesses use to attract consumers, capture their attention from consumers to optimise profits.

Question 13

Product

Answer 13

the right product is likely one to bring some benefit, solves a problem, makes life easier, or is superior to an alternative in terms of performance, reliability e.xt

Question 14

Price

Answer 14

when settling a business price most take into consideration their positions in tis target makret. for example, selling in the top end of the market for mobile phones=charger higher prices to attract higher income consumers.

Question 15

Place

Answer 15

a traditional, consumers went to a storefront as the point of sale. Consumers want to inspect or try a good before they buy.

Question 16

Promotion

Answer 16

it involves the strategiegs businesses use to let consumer know about their product or service. this can take many forms, each finely tuned to suit their target audience.

Question 17

People

Answer 17

businesses need to employ knowledgable staff who enjoy working in hteir job as part of the team.

Question 18

status quo

Answer 18

that consumers follow the same decisions made previously

Question 19

Herd behaviour

Answer 19

Consumers copy what most others are doing and follow the pack like cattle. - short cut as they don’t come to their own decision.

Question 20

Framming bias

Answer 20

is the idea that consumers decisions are dependent on the information that is presented.

Question 21

anchoring effect

Answer 21

is a mental starting point or standard against which consumers compare other information or results, therefore consumers often remember the first piece of information and not the rest - clouds judgment.

Question 22

overconfidence bias

Answer 22

Some consumers subjectevly believe that they are better than they really are in spotting bargains, winning a lottery or avoiding risk.

Question 23

Vividness bias

Answer 23

Information presented in a striking way causes people to focus to much on one thing, rather than considering all options.

Question 24

short- term or present bias

Answer 24

consumers make choices that will serve their immediate pleasure rather than thinking about the consequences in the future

Question 25

risk or loss aversion bias

Answer 25

consumers tend to place more importance on avoiding losses than on having an equal size gain.

Question 26

Narrative fallacy

Answer 26

When decion markers put too much importance on the narrative of the story rather than the cold hard relevant facts.