Chapter 2

ECONOMIC ASSUMPTION

AUNTORIP KARIM - CLASS VIII ECONOMICS - CHAPTER 2

 When making economic decisions, economists assume
that consumers and producers will choose a course of
action that will give them benefit and profits prospectively

AUNTORIP KARIM - CLASS VIII ECONOMICS - CHAPTER 2

◊Methods how consumers aim to maximize benefit:

1) If a consumer is faced with buying exactly the same product

from three different suppliers, the consumer will always buy
from the one who offers the cheapest price.
2) If consumer is faced with buying a product from three
different suppliers at the best price, the consumer will buy the
best quality product.

AUNTORIP KARIM - CLASS VIII ECONOMICS - CHAPTER 2

◊Methods how producers aim to maximize profit:
1) If a business owner can buy some raw materials from
three different suppliers, the owner will always buy from
the cheapest available, as long as the quality is same.

2) When setting a price for a product, a business owner

will always choose the highest price that the market can
stand. For example, if a business can sell a product for £5,
he will not sell it for £4.

AUNTORIP KARIM - CLASS VIII ECONOMICS - CHAPTER 2

□Cases where consumer fails to maximize their benefit while making a choice:
1) It is possible that some consumers have difficulty in calculating the
benefits from consuming a product. This is because measuring the
satisfaction gained from consuming a product is often very difficult.
2) Some consumers develop buying habits that may affect that ability
to make rational choices. For example, over a period of time, some
consumers stay loyal to a brand. Once they become used to a brand,
they continue to buy it habitually.
3) In some cases, consumers are influenced by the behavior of
others. Young consumers may adapt some buying habits of their
parents.

AUNTORIP KARIM - CLASS VIII ECONOMICS - CHAPTER 2

□Cases where producer fails to maximize their profits while making a choice:

1) The performance of a business may be influenced by the behavior

of other people in the organization. In some businesses, not all
decisions are made directly by the owner. For example, Managers in
the sales department of a business may try to maximize their sales
revenue but not profit.
2) Some producers have alternative business objectives.
Producers may be focusing on customer service and capturing
greater market share; hence, it may not be possible for them to
focus on profit maximization at the same time.

3) Some commercial enterprises operate as charity. They are also

referred to as Non-Profit Organizations. They aim to raise
awareness and money for a particular cause.

AUNTORIP KARIM - CLASS VIII ECONOMICS - CHAPTER 2

 THE END

AUNTORIP KARIM - CLASS VIII ECONOMICS - CHAPTER 2