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How Markets Work

Alternative views of consumer behaviour

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Overview

Recall questions on why consumers depart from rationality: the influence of others, habitual behaviour and weakness at computation.

What you need to know

Answer each one before you reveal it.

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Key term

How does automatic repetition of past choices affect consumer behaviour?

Questions from this subtopic

Each one with the model answer underneath.

  1. 1

    How does observing what others purchase affect consumer decision-making?

    Model answer

    Consumers may copy the purchasing decisions of others rather than independently assessing which option maximises their own utility, leading to choices influenced by social observation rather than rational calculation.

  2. 2

    Why might conforming to social expectations cause consumers to deviate from utility maximisation?

    Model answer

    Consumers may purchase goods or services to meet social norms or expectations rather than choosing options that would provide them with the greatest personal satisfaction.

  3. 3

    What is herd behaviour in markets and how does it affect consumer rationality?

    Model answer

    Herd behaviour occurs when consumers follow the actions of a larger group, such as buying trending products or panic-buying, overriding their individual assessment of costs and benefits.

  4. 4

    How does automatic repetition of past choices affect consumer behaviour?

    Model answer

    Consumers repeat previous purchasing decisions out of habit without consciously reassessing whether those choices still maximise their utility in current circumstances.

  5. 5

    Why does reduced deliberation over alternatives lead to potentially irrational consumption?

    Model answer

    When consumers do not actively consider alternative options due to habit, they may miss better choices that would provide greater utility, continuing with familiar but suboptimal purchases.

  6. 6

    Explain how habitual behaviour can cause persistence of suboptimal consumption patterns.

    Model answer

    Once a purchasing habit is established, consumers continue making the same choices even when superior alternatives become available, because they do not reassess their options each time they buy.

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