Economics explained
Category:
Behavioral economics

Are consumers rational?
The secret to scoring awesome grades in economics is to have corresponding awesome notes.
A common pitfall for students is to lose themselves in a sea of notes: personal notes, teacher notes, online notes textbooks, etc... This happens when one has too many sources to revise from! Why not solve this problem by having one reliable source of notes? This is where we can help.
What makes TooLazyToStudy notes different?
Our notes:
-
are clear and concise and relevant
-
is set in an engaging template to facilitate memorisation
-
cover all the important topics in the O level, AS level and A level syllabus
-
are editable, feel free to make additions or to rephrase sentences in your own words!
Looking for live explanations of these notes? Enrol now for FREE tuition!
Perfect information
The law of diminishing marginal utility assumes that consumers act and behave in a rational way in their purchasing decisions and consumers possess perfect information. For example, about the goods that are available to buy, their prices and quality, and about the utility which will be derived from their consumption.
Imperfect information
When attempting to maximise total utility, more often than not consumers possess imperfect information. As a result, they make 'wrong' decisions. For example, consumers may choose to under-consume a merit good such as education and over-consume a demerit good such as tobacco because they possess imperfect information about the long-term consequences of their choices.
A few other examples will show why consumers often act in an irrational way:
In the case of special offers such as ‘buy one get one free’.
Consumers may have no intention of buying the product until they enter the shop. Seeing the offer produces an impulsive cognitive response to buy.
Where payment can be deferred.
This allows consumers to purchase beyond their ability to pay outright at the time of sale – they may use a credit card to obtain what they want.
Brand image
Where a consumer is emotionally attached to a brand or where there is a prejudice against a brand, so influencing consumption