17 Questions
What is the assumption behind the rational consumer behaviour model?
Consumers make all choices independently
What is the goal of rational consumers in their decision-making process?
To maximize their utility
What does the Law of Diminishing Marginal Utility explain?
Why the extra satisfaction gained from consuming more units of a good diminishes
What is marginal utility?
The change in total utility from consuming an extra unit of a product
What is the result of the Law of Diminishing Marginal Utility on the demand curve?
The demand curve slopes downward
What do rational consumers calculate when making decisions?
Marginal cost and marginal benefit
What occurs when people have inaccurate, incomplete, uncertain, or misunderstood data?
Information failure
What type of information occurs when buyers and sellers have the same perfect information?
Symmetric information
What occurs when people taking out insurance are often those at highest risk?
Adverse selection
What can make people more careless due to being insured?
Moral hazard
What type of information occurs when either the buyer or seller lacks information needed for a fully-informed decision?
Information gap
What is the primary reason behind the principal-agent problem?
The goals of the principals are different from the agents
What is the main purpose of government policies in addressing information failure or gaps?
To improve information to help producers and consumers make more accurate decisions
What is an example of a government policy that addresses information failure or gaps?
Compulsory labelling on products
What is a potential consequence of government policies?
The government may act on poor or incomplete information, leading to government failure
What is an example of a campaign that addresses information failure or gaps?
Campaigns to raise awareness of risks for selling used products of drink-driving, drug abuse, or smoking
What is the primary purpose of industry standards and guarantees?
To protect consumers by ensuring certain quality standards
Test your understanding of consumer behaviour in AQA Economics Year 1, including rational consumer behaviour, Law of Diminishing Marginal Utility, and the assumptions of consumer decision-making. Learn how consumers make choices to maximise utility and more.
Make Your Own Quizzes and Flashcards
Convert your notes into interactive study material.
Get started for free
