Consumer Decision Making
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Questions and Answers

What is the fundamental economic problem that scarcity refers to?

  • Limited resources and limited wants
  • Unlimited wants and needs, but limited resources (correct)
  • Unlimited resources and limited wants
  • Limited resources and unlimited wants
  • What is the term for the value of the next best alternative forgone when a choice is made?

  • Trade-off
  • Scarcity
  • Opportunity cost (correct)
  • Budget constraint
  • What type of opportunity cost refers to the direct cost of a choice, such as the price of a product?

  • Budget constraint
  • Non-monetary opportunity cost
  • Trade-off
  • Monetary opportunity cost (correct)
  • What is a direct result of the fundamental economic problem of scarcity?

    <p>Individuals having to make choices about how to allocate resources</p> Signup and view all the answers

    What is a characteristic of opportunity cost?

    <p>It is subjective and varies from person to person</p> Signup and view all the answers

    What is an example of a trade-off resulting from scarcity?

    <p>Choosing to spend $100 on a concert ticket means giving up the opportunity to spend that money on something else</p> Signup and view all the answers

    What is a consequence of scarcity?

    <p>Individuals are forced to make choices about how to allocate resources</p> Signup and view all the answers

    What is an example of an opportunity cost?

    <p>The value of the next best alternative forgone</p> Signup and view all the answers

    Study Notes

    Decision Making

    • Consumer decision making is the process by which individuals make choices about what, how, and when to purchase goods and services.
    • Factors influencing consumer decision making:
      • Personal factors: age, income, occupation, lifestyle, and personality
      • Psychological factors: motivation, perception, and learning
      • Social factors: family, culture, and social status
      • Economic factors: price, quality, and availability
    • Decision making models:
      • Rational choice model: consumers make decisions based on complete and perfect information
      • Behavioral choice model: consumers make decisions based on biases, heuristics, and mental shortcuts

    Scarcity

    • Scarcity refers to the fundamental economic problem of unlimited wants and needs, but limited resources.
    • Scarcity leads to:
      • Trade-offs: consumers must choose between different options due to limited resources
      • Opportunity cost: the value of the next best alternative forgone
      • Budget constraint: consumers must allocate their limited resources to meet their needs and wants
    • Types of scarcity:
      • Absolute scarcity: a shortage of a particular resource
      • Relative scarcity: a shortage of a resource relative to its demand

    Opportunity Cost

    • Opportunity cost is the value of the next best alternative forgone when a choice is made.
    • Opportunity cost is a key concept in understanding consumer decision making and scarcity.
    • Types of opportunity cost:
      • Monetary opportunity cost: the direct cost of a choice, such as the price of a product
      • Non-monetary opportunity cost: the indirect cost of a choice, such as time and effort
    • Examples of opportunity cost:
      • Choosing to spend $100 on a concert ticket means giving up the opportunity to spend that $100 on a new video game
      • Choosing to spend 2 hours studying means giving up the opportunity to spend that time watching a movie

    Decision Making

    • Consumer decision making is a complex process involving personal, psychological, social, and economic factors.
    • Personal factors influencing decision making include age, income, occupation, lifestyle, and personality.
    • Psychological factors include motivation, perception, and learning.
    • Social factors include family, culture, and social status.
    • Economic factors include price, quality, and availability.
    • Rational choice model: consumers make decisions based on complete and perfect information.
    • Behavioral choice model: consumers make decisions based on biases, heuristics, and mental shortcuts.

    Scarcity

    • Scarcity is the fundamental economic problem of unlimited wants and needs, but limited resources.
    • Scarcity leads to trade-offs, where consumers must choose between different options.
    • Opportunity cost is the value of the next best alternative forgone.
    • Budget constraint: consumers must allocate their limited resources to meet their needs and wants.
    • Absolute scarcity: a shortage of a particular resource.
    • Relative scarcity: a shortage of a resource relative to its demand.

    Opportunity Cost

    • Opportunity cost is the value of the next best alternative forgone when a choice is made.
    • Opportunity cost is a key concept in understanding consumer decision making and scarcity.
    • Monetary opportunity cost: the direct cost of a choice, such as the price of a product.
    • Non-monetary opportunity cost: the indirect cost of a choice, such as time and effort.
    • Examples of opportunity cost:
      • Giving up a new video game to spend $100 on a concert ticket.
      • Giving up watching a movie to spend 2 hours studying.

    Consumer Choices

    Scarcity

    • Scarcity is the fundamental economic problem of limited resources to meet unlimited wants and needs.
    • It is characterized by unlimited wants and needs, but limited resources (goods and services).
    • Scarcity necessitates choice, as individuals must allocate resources to meet their needs.
    • As a result, scarcity forces individuals to make choices about how to allocate resources.
    • This leads to trade-offs and opportunity costs.

    Opportunity Cost

    • Opportunity cost is the value of the next best alternative that is given up when a choice is made.
    • It is not limited to monetary costs, but also includes time, effort, and other resources.
    • Opportunity cost is subjective and varies from person to person.
    • Understanding opportunity cost is crucial in understanding consumer behavior and decision-making.
    • Examples of opportunity cost include:
      • Giving up the opportunity to spend $100 on a new video game to spend it on a concert ticket.
      • Giving up the opportunity to spend 3 hours watching a movie to spend it studying for an exam.

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    Description

    Understand the process of consumer decision making, including personal, psychological, social, and economic factors that influence purchasing choices and decision making models.

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