Student ID#: 0000352827

Name: Ghulam Rubab

Semester: Autumn, 2022
Course Code: 5406
Course: Micro Economics (5406)

ASSIGNMENT No. 2
Q.1 What is scale of preferences? What are the application and uses of indifference curve technique?
An indifference curve is a chart showing various combinations of two goods or commodities that leave the
consumer equally well off or equally satisfied—hence indifferent—when it comes to having any combination
between the two items that is shown along the curve.
For instance, if you like both hot dogs and hamburgers, you may be indifferent to buying either 20 hot dogs
and no hamburgers, 45 hamburgers and no hot dogs, or some combination of the two—for example, 14 hot
dogs and 20 hamburgers (see point “A” in the chart below). Either combination provides the same utility.
 An indifference curve shows a combination of two goods in various quantities that provides equal
satisfaction (utility) to an individual.
 It is used in economics to describe the point where individuals have no particular preference for either
one good or another based on their relative quantities.
 Along the curve, a consumer thus has an equal preference for the various combinations of goods
shown.
 Typically, indifference curves are shown convex to the origin, and no two indifference curves ever
intersect.
Understanding Indifference Curves
Standard indifference curve analysis operates using a simple two-dimensional chart. Each axis represents one
type of economic good. Along the indifference curve, the consumer is indifferent between any of the
combinations of goods represented by points on the curve because the combination of goods on an indifference
curve provides the same level of utility to the consumer.
For example, a young boy might be indifferent between possessing two comic books and one toy truck, or four
toy trucks and one comic book, so both of these combinations would be points on an indifference curve of the
young boy.
Indifference curves are heuristic devices used in contemporary microeconomics to demonstrate consumer
preference and the limitations of a budget. Economists have adopted the principles of indifference curves in
the study of welfare economics.
Indifference is conceptually incompatible with real-life economic action. Every action that people take
indicates a preference, not indifference. Furthermore, people’s relative preferences have been found to change
over time and depending on their social context.
Indifference Curve Analysis
Indifference curves operate under many assumptions; for example, each indifference curve is typically convex
to the origin, and no two indifference curves ever intersect. Consumers are always assumed to be more
satisfied when achieving bundles of goods on indifference curves that are farther from the origin.
As income increases, an individual will typically shift their consumption level because they can afford more
commodities, with the result that they will end up on an indifference curve that is farther from the origin—
hence better off.
Many core principles of microeconomics appear in indifference curve analysis, including individual
choice, marginal utility theory, income, substitution effects, and the subjective theory of value. Indifference
curve analysis emphasizes marginal rates of substitution (MRS) and opportunity costs. Indifference curve
analysis typically assumes that all other variables are constant or stable.
Most economic textbooks build upon indifference curves to introduce the optimal choice of goods for any
consumer based on that consumer’s income. Classic analysis suggests that the optimal consumption bundle
takes place at the point where a consumer’s indifference curve is tangent with their budget constraint.
The slope of the indifference curve is known as the marginal rate of substitution (MRS). The MRS is the rate
at which the consumer is willing to give up one good for another. For example, a consumer who values apples
will be slower to give them up for oranges, and the slope will reflect this rate of substitution.
Criticisms and Complications of the Indifference Curve
Indifference curves, like many aspects of contemporary economics, have been criticized for oversimplifying or
making unrealistic assumptions about human behavior.2 For example, consumer preferences might change
between two different points in time, rendering specific indifference curves practically useless. Other critics
note that it is theoretically possible to have concave indifference curves or even circular curves that are either
convex or concave to the origin at various points.
What does an indifference curve explain?
An indifference curve is used by economists to explain the tradeoffs that people consider when they encounter
two goods that they wish to buy. Because people are constrained by a limited budget, they cannot purchase
everything. Instead, a cost-benefit analysis must be considered. Indifference curves visually depict this tradeoff
by showing which quantities of two goods provide the same utility to a consumer (i.e., where they remain
indifferent).
What is the formula for an indifference curve?
The formula used in economics for constructing an indifference curve is:
𝑈(𝑡, 𝑦)=𝑐

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where:
 c stands for the utility level achieved on the curve and is constant.
 t and y are the quantities of two different goods, t and y.

Different values of c correspond to different indifference curves, so if we increase our expected utility, we
obtain a new indifference curve that is plotted above and to the right of the previous one.
Q.2 State and explain the law of diminishing return whit the help of assumption schedule and diagram.
The law of diminishing returns states that an additional amount of a single factor of production will result in a
decreasing marginal output of production. The law assumes other factors to be constant. It means that if X
produces Y, there will be a point when adding more quantities of X will not help in a marginal increase in
quantities of Y.

In the above graph of the law of diminishing returns, as factor X rises from 1 unit to 2 units, the number of Y
increases. But as X quantities rise further to P, production assumes a decreasing rate till Yp. This describes the
law above. Another noticeable aspect is that there comes a point when a further increase in units of X will only
reduce the production of Y. Thus, not only does increasing input affect marginal product but also the total
product. This law is mostly applicable in a production setting.
1. The Factor of Production – Any input that generates a desired quantity of output. Concerning the law
of diminishing returns, only one factor at a time is considered.
2. Marginal Product – With every additional input, the increase in the total product is referred to as the
marginal product. In the graph above, Y2-Y1 is the marginal product.
3. Total Product – When an input is applied through a process, the total product is the result or outcome
as an aggregate measure.

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Assumptions of Law of Diminishing Marginal Returns
 The law is used mostly by considering a short-run production scenario. That is because the principle lies
in keeping all other factors of production constant, except the one used to correlate with output. It is
not possible in a long-run view of production.
 The input and the process(es) should be held independent of technological aspects as technology can
play its part in improving production efficiencies.
Examples of Law of Diminishing Marginal Returns
Below are examples of the law of diminishing returns.
Example #1
Suppose that a factory produces a certain good given by the following equation:
Q = -L3 + 27L2 + 15L
Where,
Q is the quantity of production
L is the input in terms of labor
Describe if the law of diminishing returns applies. If yes, how?
Solution:
To check the applicability of this law, we will quantify units of production by assuming different values of labor
input.

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We have plotted the values of Q and L on a graph for analysis. The Y-axis represents the product (total and
marginal). The X-axis represents units of labor.

In the above law of diminishing return graph, two points are critical to the law:

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  Point A – the limiting marginal product, and
 Point B – the limiting total product.
The following points are worth noting:
We can divide this production graph into two stages concerning the marginal output.
1. As labor input increases, the marginal product also increases before the number of workers, L = 9. It is
the stage of growing returns.
2. The marginal product produced by the 11th unit of labor is less than the 10th. It begins the stage of
diminishing returns.
The total product, i.e., Q’s quantity, does not decrease before the 20th worker is employed. The marginal
product enters the stage of negative returns from here.
The factory can employ 9 workers to keep the marginal product at a rising rate. However, it can add as many as
19 workers before noting a fall in the total product.
Q.3 State and explain the law of variables proportions with the help of schedule and diagram.
Law of Variable Proportions occupies an important place in economic theory. This law is also known as Law of
Proportionality.
Keeping other factors fixed, the law explains the production function with one factor variable. In the short run
when output of a commodity is sought to be increased, the law of variable proportions comes into operation.
Therefore, when the number of one factor is increased or decreased, while other factors are constant, the
proportion between the factors is altered. For instance, there are two factors of production viz., land and labour.
Land is a fixed factor whereas labour is a variable factor. Now, suppose we have a land measuring 5 hectares.
We grow wheat on it with the help of variable factor i.e., labour. Accordingly, the proportion between land and
labour will be 1: 5. If the number of laborers is increased to 2, the new proportion between labour and land will
be 2: 5. Due to change in the proportion of factors there will also emerge a change in total output at different
rates. This tendency in the theory of production called the Law of Variable Proportion.
Definitions:
“As the proportion of the factor in a combination of factors is increased after a point, first the marginal and then
the average product of that factor will diminish.” Benham
“An increase in some inputs relative to other fixed inputs will in a given state of technology cause output to
increase, but after a point the extra output resulting from the same additions of extra inputs will become less and
less.” Samuelson
“The law of variable proportion states that if the inputs of one resource is increased by equal increment per unit
of time while the inputs of other resources are held constant, total output will increase, but beyond some point
the resulting output increases will become smaller and smaller.” Leftwitch
Assumptions:
Law of variable proportions is based on following assumptions:

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(i) Constant Technology:
The state of technology is assumed to be given and constant. If there is an improvement in technology the
production function will move upward.
(ii) Factor Proportions are Variable:
The law assumes that factor proportions are variable. If factors of production are to be combined in a fixed
proportion, the law has no validity.
(iii) Homogeneous Factor Units:
The units of variable factor are homogeneous. Each unit is identical in quality and amount with every other unit.
(iv) Short-Run:
The law operates in the short-run when it is not possible to vary all factor inputs.
Explanation of the Law:
In order to understand the law of variable proportions we take the example of agriculture. Suppose land and
labour are the only two factors of production.
By keeping land as a fixed factor, the production of variable factor i.e., labour can be shown with the help
of the following table:

From the table 1 it is clear that there are three stages of the law of variable proportion. In the first stage average
production increases as there are more and more doses of labour and capital employed with fixed factors (land).
We see that total product, average product, and marginal product increases but average product and marginal
product increases up to 40 units. Later on, both start decreasing because proportion of workers to land was
sufficient and land is not properly used. This is the end of the first stage.
The second stage starts from where the first stage ends or where AP=MP. In this stage, average product and
marginal product start falling. We should note that marginal product falls at a faster rate than the average
product. Here, total product increases at a diminishing rate. It is also maximum at 70 units of labour where
marginal product becomes zero while average product is never zero or negative.

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The third stage begins where second stage ends. This starts from 8th unit. Here, marginal product is negative
and total product falls but average product is still positive. At this stage, any additional dose leads to positive
nuisance because additional dose leads to negative marginal product.
Graphic Presentation:
In fig. 1, on OX axis, we have measured number of labourers while quantity of product is shown on OY axis.
TP is total product curve. Up to point ‘E’, total product is increasing at increasing rate. Between points E and G
it is increasing at the decreasing rate. Here marginal product has started falling. At point ‘G’ i.e., when 7 units
of labourers are employed, total product is maximum while, marginal product is zero. Thereafter, it begins to
diminish corresponding to negative marginal product. In the lower part of the figure MP is marginal product
curve.

Up to point ‘H’ marginal product increases. At point ‘H’, i.e., when 3 units of labourers are employed, it is
maximum. After that, marginal product begins to decrease. Before point ‘I’ marginal product becomes zero at
point C and it turns negative. AP curve represents average product. Before point ‘I’, average product is less than
marginal product. At point ‘I’ average product is maximum. Up to point T, average product increases but after
that it starts to diminish.

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Three Stages of the Law:
1. First Stage:
First stage starts from point ‘O’ and ends up to point F. At point F average product is maximum and is equal to
marginal product. In this stage, total product increases initially at increasing rate up to point E. between ‘E’ and
‘F’ it increases at diminishing rate. Similarly marginal product also increases initially and reaches its maximum
at point ‘H’. Later on, it begins to diminish and becomes equal to average product at point T. In this stage,
marginal product exceeds average product (MP > AP).
2. Second Stage:
It begins from the point F. In this stage, total product increases at diminishing rate and is at its maximum at
point ‘G’ correspondingly marginal product diminishes rapidly and becomes ‘zero’ at point ‘C’. Average
product is maximum at point ‘I’ and thereafter it begins to decrease. In this stage, marginal product is less than
average product (MP < AP).
3. Third Stage:
This stage begins beyond point ‘G’. Here total product starts diminishing. Average product also declines.
Marginal product turns negative. Law of diminishing returns firmly manifests itself. In this stage, no firm will
produce anything. This happens because marginal product of the labour becomes negative. The employer will
suffer losses by employing more units of labourers. However, of the three stages, a firm will like to produce up
to any given point in the second stage only.
ADVERTISEMENTS:

In Which Stage Rational Decision is Possible:

To make the things simple, let us suppose that, a is variable factor and b is the fixed factor. And a 1, a2 , a3….are
units of a and b1 b2 b3…… are unit of b.

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Stage I is characterized by increasing AP, so that the total product must also be increasing. This means that the
efficiency of the variable factor of production is increasing i.e., output per unit of a is increasing. The efficiency
of b, the fixed factor, is also increasing, since the total product with b1 is increasing.
The stage II is characterized by decreasing AP and a decreasing MP, but with MP not negative. Thus, the
efficiency of the variable factor is falling, while the efficiency of b, the fixed factor, is increasing, since the TP
with b1 continues to increase.
Finally, stage III is characterized by falling AP and MP, and further by negative MP. Thus, the efficiency of
both the fixed and variable factor is decreasing.
Rational Decision:
Stage II becomes the relevant and important stage of production. Production will not take place in either of the
other two stages. It means production will not take place in stage III and stage I. Thus, a rational producer will
operate in stage II.
Suppose b were a free resource; i.e., it commanded no price. An entrepreneur would want to achieve the
greatest efficiency possible from the factor for which he is paying, i.e., from factor a. Thus, he would want to
produce where AP is maximum or at the boundary between stage I and II.
If on the other hand, a were the free resource, then he would want to employ b to its most efficient point; this is
the boundary between stage II and III.
Obviously, if both resources commanded a price, he would produce somewhere in stage II. At what place in this
stage production takes place would depend upon the relative prices of a and b.
Condition or Causes of Applicability:
There are many causes which are responsible for the application of the law of variable proportions.
They are as follows:
1. Under Utilization of Fixed Factor:
In initial stage of production, fixed factors of production like land or machine, is under-utilized. More units of
variable factor, like labour, are needed for its proper utilization. As a result of employment of additional units of
variable factors there is proper utilization of fixed factor. In short, increasing returns to a factor begins to
manifest itself in the first stage.
2. Fixed Factors of Production.
The foremost cause of the operation of this law is that some of the factors of production are fixed during the
short period. When the fixed factor is used with variable factor, then its ratio compared to variable factor falls.
Production is the result of the co-operation of all factors. When an additional unit of a variable factor has to
produce with the help of relatively fixed factor, then the marginal return of variable factor begins to decline.
3. Optimum Production:
After making the optimum use of a fixed factor, then the marginal return of such variable factor begins to
diminish. The simple reason is that after the optimum use, the ratio of fixed and variable factors become

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defective. Let us suppose a machine is a fixed factor of production. It is put to optimum use when 4 labourers
are employed on it. If 5 labourers are put on it, then total production increases very little and the marginal
product diminishes.
4. Imperfect Substitutes:
Mrs. Joan Robinson has put the argument that imperfect substitution of factors is mainly responsible for the
operation of the law of diminishing returns. One factor cannot be used in place of the other factor. After
optimum use of fixed factors, variable factors are increased and the amount of fixed factor could be increased
by its substitutes.
Such a substitution would increase the production in the same proportion as earlier. But in real practice factors
are imperfect substitutes. However, after the optimum use of a fixed factor, it cannot be substituted by another
factor.
Applicability of the Law of Variable Proportions:
The law of variable proportions is universal as it applies to all fields of production. This law applies to any field
of production where some factors are fixed and others are variable. That is why it is called the law of universal
application.
The main cause of application of this law is the fixity of any one factor. Land, mines, fisheries, and house
building etc. are not the only examples of fixed factors. Machines, raw materials may also become fixed in the
short period. Therefore, this law holds good in all activities of production etc. agriculture, mining,
manufacturing industries.
1. Application to Agriculture:
With a view of raising agricultural production, labour and capital can be increased to any extent but not the
land, being fixed factor. Thus when more and more units of variable factors like labour and capital are applied
to a fixed factor then their marginal product starts to diminish and this law becomes operative.
2. Application to Industries:
In order to increase production of manufactured goods, factors of production has to be increased. It can be
increased as desired for a long period, being variable factors. Thus, law of increasing returns operates in
industries for a long period. But, this situation arises when additional units of labour, capital and enterprise are
of inferior quality or are available at higher cost.
As a result, after a point, marginal product increases less proportionately than increase in the units of labour and
capital. In this way, the law is equally valid in industries.
Postponement of the Law:
The postponement of the law of variable proportions is possible under following conditions:
(i) Improvement in Technique of Production:
The operation of the law can be postponed in case variable factors techniques of production are improved.

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(ii) Perfect Substitute:
The law of variable proportion can also be postponed in case factors of production are made perfect substitutes
i.e., when one factor can be substituted for the other.
Q.4 what are perfect and imperfect markets? What are the different classifications of a market?
The term ‘market’ originated from Latin word ‘marcatus’ having a verb ‘mercari’ implying ‘merchandise’
‘ware traffic’ or ‘a place where business is conducted’. For a layman, the word ‘market’ stands for a place
where goods and persons are physically present. For him, ‘market’ is ‘market’ who speaks of ‘fish market’,
‘mutton market’, ‘meat market’, ‘vegetable market’, ‘fruit market’, ‘grain market’. For him, it is a congregation
of buyers and sellers to transact a deal. However, for us as the students of marketing, it means much more. In a
broader sense, it is the whole of any region in which buyers and sellers are brought into contact with one
another and by means of which the prices of the goods tend to be equalized easily and quickly.
Classification of Markets—Traditional:
Markets can be classified on different bases of which most common bases are: area, time, transactions,
regulation, and volume of business, nature of goods, and nature of competition, demand and supply conditions.
This classification is off-shoot of traditional approach.
Traditionally, a market was a physical place where buyers and sellers gathered to buy and sell the goods.
Economists describe a market as a collection buyers and sellers who transact over a particular product or
product class.
A. On the Basis of Area:
Using area, there can be local, regional, national and international markets. Local markets confine to locality
mostly dealing in perishable and semi-perishable goods like fish, flowers, vegetables, eggs, milk, and others.
Regional market covers a wider area may be a district, a state or inter-state dealing in durables both consumer
and non durables and industrial products, including agricultural produce.
In case of national markets the area covered are national boundaries dealing in durable and non-durable
consumer goods, industrial goods, metals, forest products, agricultural produce.
In case of world or international market, the movement of goods is widespread throughout the world, making it
as a single market. It should be noted that due to the latest technologies in transport, storage and packaging,
even the most perishable goods are sold all over the world, not that only durables.
B. On the basis of Time:
The time duration is the factor. Accordingly, there can be short period and long period markets. Short-period
markets are for highly perishable goods of all kinds and long-period markets are for durable goods of different
varieties may be produced or manufactured.

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C. On the basis of Transactions:
Taking the nature of transactions, these can be ‘spot’ and ‘future’ markets. In ‘spot’ market, once the transaction
takes place, the delivery takes place, while in case of future markets, transactions are finalized pending delivery
and payment for future dates.
D. On the basis of Regulation:
Taking regulation, markets can be regulated and non-regulated. A ‘regulated market’ is one in which business
dealings take place as per set rules and regulations regarding, quality, price, source changes and so on.
These can be in agricultural products or produce and securities. On the other hand, unregulated market is a free
market where there are no rules and regulations; even if they are there, they are amended as per the
requirements of parties of exchange.
E. On the Basis of Volume of Business:
Taking volume of business as a basis, there can be two types of markets namely, “Wholesale” and “Retail”.
Wholesale markets are featured by large volume business and wholesalers.On the other hand, ‘Retail’ markets
are those where quantity bought and sold is on small-scale. The dealers are retailers who buy from wholesalers
and sell back to consumers.
F. On the basis of Nature of Goods:
Taking the nature of goods, there can be commodity markets, capital markets. ‘Commodity’ markets deal in
favour of material, produce, manufactured goods may be consumer and industrial and bullion market dealing
precious metals.
‘Capital’ market is a market for finance. These markets can be subdivided into ‘money’ market dealing in
lending, and borrowing of money; ‘Securities’ market or ‘stock’ market dealing in buying and selling of shares
and debentures and ‘foreign exchange’ market where it is a forex market dealing buying and selling of foreign
currencies may be hard or soft.
G. On the basis of Nature of Competition:
Based on competition or competitive forces, there can be variety of markets for a product or service. However,
only two are the most important namely, perfect and imperfect.
A ‘perfect’ market is one which is characterized by:
(a) Large number of buyers and sellers
(b) Prevalence of single lowest price for products those are ‘homogeneous’
(c) The perfect knowledge on the part of buyers and sellers
(d) Free entry and exit of firms in market. These types for markets exist hardly.
The other one is ‘imperfect’ which is featured by:
(a) Products may be similar but not identical
(b) Different prices for a class of goods
(c) Existence of physical and psychological barriers on movement of goods

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(d) No perfect knowledge of products and other dimensions on the part of buyers and sellers.
H. On the basis of Demand and Supply:
Based on demand and supply conditions or hold of buyers and sellers, there can be seller’s and buyer’s markets.
A seller’s market is one where sellers are in driver’s seat and the buyers are at the receiving end.
In other words, it is a situation where demand for goods exceeds supply. On the other hand, buyer’s market is
one where buyers are in commanding position. That is, supply is exceeding the demand for the goods.
Classification of Markets—Modern:
The modern classification is based on the consumer orientation because in modern economic system consumer
is the king-pin and a decisive driving force.
Accordingly, the marketing experts have identified markets based on such broad-based classification namely,
consumer, business, global and, non-profit and government markets.
Q.5 explain the following terms with suitable examples:
a. Supply of capital
It is the amount available for investment. It is called savings. It is the amount left after consumption. It is the
monetary value of products left after consumption. It is directly related to interest rate if interest rate is high, the
people save more to earn more interest and vice versa.
Symbolically,

In the above table, when interest rate is increased from 4% to 6% and 8% supply of capital ( savings) increases
from Rs 6 billions to Rs 8 billions and Rs 10 billions respectively. If we represent savings with respect to
interest rate, we obtain an upwardly sloped curve.

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The equilibrium interest rate is given by the point of intersection of investment and savings curves. In the above
figures, it is given by point E. However, the actual interest rate may be above or below the equilibrium interest
rate. If it is above the level of equilibrium, saving exceeds investment. The excess supply of capital brings the
interest rate down to equilibrium level. If it is below the level of equilibrium, investment exceeds savings. The
excess demand for capital brigs the interest rate up to equilibrium level. It means sooner or later, the actual
interest rate comes to the equilibrium level even it is above or below than it at any instant.
The equilibrium interest rate is given by the point of intersection of investment and savings curves. In the above
figures, it is given by point E. However, the actual interest rate may be above or below the equilibrium interest
rate. If it is above the level of equilibrium, saving exceeds investment. The excess supply of capital brings the
interest rate down to equilibrium level. If it is below the level of equilibrium, investment exceeds savings. The
excess demand for capital brigs the interest rate up to equilibrium level. It means sooner or later, the actual
interest rate comes to the equilibrium level even it is above or below than it at any instant.
The equilibrium interest rate is given by the point of intersection of investment and savings curves. In the above
figures, it is given by point E. However, the actual interest rate may be above or below the equilibrium interest
rate. If it is above the level of equilibrium, saving exceeds investment. The excess supply of capital brings the
interest rate down to equilibrium level. If it is below the level of equilibrium, investment exceeds savings. The
excess demand for capital brigs the interest rate up to equilibrium level. It means sooner or later, the actual
interest rate comes to the equilibrium level even it is above or below than it at any instant.
Criticisms
1. Money is not veil and is not just a medium of exchange. It is asset too. More or less money has effect on
investment, production, employment level etc.
2. Money is not demanded or borrowed only for investment but also for speculation and precaution

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 3. This theory is based upon diminishing marginal productivity of capital but there may be increase in
marginal productivity of capital due to advancement in technology, improvement in human resource etc.
4. Both demand for capital and supply of capital are not only determined by interest rate but also upon
level of income
5. Supply of capital comes not only from saving but also from dishoarding, depreciation fund etc.
6. Saving and investment are not independent of each other. They are affected by each other.
b. Consumer Behavior
Studying consumer behavior is important because it helps marketers understand what influences consumers’
buying decisions.
By understanding how consumers decide on a product, they can fill in the gap in the market and identify the
products that are needed and the products that are obsolete.
Studying consumer behavior also helps marketers decide how to present their products in a way that generates a
maximum impact on consumers. Understanding consumer buying behavior is the key secret to reaching and
engaging your clients, and converting them to purchase from you.
A consumer behavior analysis should reveal:
 What consumers think and how they feel about various alternatives (brands, products, etc.);
 What influences consumers to choose between various options;
 Consumers’ behavior while researching and shopping;
 How consumers’ environment (friends, family, media, etc.) influences their behavior.
Consumer behavior is often influenced by different factors. Marketers should study consumer purchase patterns
and figure out buyer trends.
In most cases, brands influence consumer behavior only with the things they can control; think about how IKEA
seems to compel you to spend more than what you intended to every time you walk into the store.
So what are the factors that influence consumers to say yes? There are three categories of factors that influence
consumer behavior:
1. Personal factors: an individual’s interests and opinions can be influenced by demographics (age,
gender, culture, etc.).
2. Psychological factors: an individual’s response to a marketing message will depend on their perceptions
and attitudes.
3. Social factors: family, friends, education level, social media, income, all influence consumers’ behavior.

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