1.1.2 Economic assumptions

Rational consumor

aim to choose the lowest priced product when choosing between two identical (homogenous) products.

Rational firms

choose the lowest priced product when choosing between two identical (homogenous) products.

Reasons consumers may not maximise their benefits

• Herding behaviour

• Habitual behaviour

• Consumor weakness in consumptione

herding behaviour

Individuals are influenced by consumption norms within their social groups.

Habitual behaviour

Consumers may stick with their current situation due to a reluctance to change.

Weakness at computation

Humans are not always adept at mathematical computation, leading to biases in decision-making.

Managerial objectives

Managers may prioritize objectives like maximizing their salary or sales, which may not align with maximizing profits.

Alternate business objectives

Some businesses prioritize objectives other than profit, such as customer care or social causes.

Charitable operations

Charitable organizations may prioritize raising money or awareness for a cause over maximizing profits