Economics 6
- Created by: Gabrielle
- Created on: 29-12-13 17:47
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- The Consumer
- Total Utility
- Rises at first as additional units are consumed, reaches a maximum and then begins to fall
- Marginal utility
- The addition to satisfaction from the consumption of successive units
- Marginal utility falls as consumption increases
- The consumer’s budget – the bundles of goods the consumer can afford with a given income
- Inferior Goods
- When the budget constraint shifts outwards the consumer buys less of the good
- Behavioral Economics
- Consumers use rules of thumb
- Heuristics
- Anchoring – using familiarity to make decisions
- Availability – assessing risks of the likelihood of something happening
- Representativeness – decisions made based on how representative something is to a stereotype
- Heuristics
- Reluctant to change their minds
- Consumers use rules of thumb
- Expected utility theory
- Preferences can and will be ranked by consumers
- Branding & Advertising
- Critique
- Waste of resources
- Psychological not informative
- Creates unwanted desire
- Impedes competition
- Defence
- Provides information
- Signal of quality
- Information means more competition
- Critique
- Total Utility
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