Cnsumer Behaviour

Question 1

Which of the following is a problem with traditional economic models like perfect competition?

They ignore the assumption that consumers are utility-maximisers

They assume that consumers always maximise utility which is realistic

They focus too much on the behaviour of individual consumers

They assume that consumers always behave rationally which is not realistic

Answer 1

They assume that consumers always behave rationally which is not realistic

Question 2

Behavioural economics suggests that when consumers are faced with complex financial decisions, such as choosing between different pension schemes, social welfare is likely to increase if

Consumers are able to choose between a limited number of options

Consumers receive untrue information about their options

Consumers are provided with as much information as possible about many options

Consumers are not given any choice between pension schemes

Answer 2

Consumers are able to choose between a limited number of options

Question 3

Why consumers always behave rationally

Why consumers are emotional

Why consumers do not always make decisions which maximise their utility

Why firms make profit

Answer 3

Why consumers do not always make decisions which maximise their utility

Question 4

A rational consumer will always attempt to

Save for unexpected events

Maximise their total utility

Consume all of their income

Minimise marginal utility

Answer 4

Maximise their total utility

Question 5

A key difference between behavioural economics and traditional economic models is that behavioural economic models assume that

People always act rationally

Emotional factors can influence economic decision making

Consumers attempt to maximise their total utility

People consider all available information when making choices

Answer 5

Emotional factors can influence economic decision making