The economic model of consumer behavior predicts that

This preview shows page 2 - 5 out of 6 pages.

The economic model of consumer behavior predicts that the consumer willChoose the combination of clothing and non-clothing consumption that makes her as well off as possible from among the combinations of clothing and non-clothing items she can affordWhen modeling consumer behavior, utility Reflects the enjoyment a consumer receives from consuming a particular set of goods and services Products become more desirable whenMovie stars use a product because consumers who use the same product may feel more fashionable Celebrities use a product because consumers who use the same product may feel closer to famous peopleProfessional athletes use a product because consumers perceive them to be particularly knowledgeable about itIn the presence of shortages, why would a firm not raise prices when doing so would seem to increase profits?Increasing prices might alienate customersIncreasing prices might result in short run gains at the expense of long run profitsIncreasing prices requires the firm to pay substantial “switching costs”Consumers areInterested in making themselves as well off as possible in material senseConcerned with fairness as exemplified by donations to charity If a network externality is present for a product, then
Econ exam 2 study guideConsumer choices are affected by social influences such as:FairnessWhether consumption of a product will make the consumer appear fashionableCelebrity endorsementsWhat other consumers are buyingAn individual’s demand for clothes depends onThe cost of the clothesThe individual’s tastes and preferencesOther consumers’ consumption of clothesAccording to behavioral economics, consumers:Do not always behave rationally because they fail to ignore sunk costs People might not act rationally because theyIgnore nonmonetary opportunity costs Global trend towards large multinational firms is partially driven byComparative advantageNations that use trade restrictions to pursue global environmental goals will:Encounter resistance from the WTO
Econ exam 2 study guideChapter 5One reason pollution limits are difficult to implement is due to the high cost to monitor compliancePollution limits are difficult to implement because it is difficult to assign individual limits and

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture