Pearson Edexcel IAL Economics 1.3.2 Consumer behaviour & demand Question

Practise demand analysis through consumer behaviour, utility, demand shifts and elasticity calculations using tables, extracts and diagrams.

Exam points

calculate and interpret PED, YED or XED from price, income and quantity data tables
use demand diagrams to show movements, shifts and tourism or product market changes
explain consumer choices using rationality, habit and diminishing marginal utility evidence

Covered syllabus points

1.3.2.1a - assumption of rationality in decision making: consumers aim decision making to maximise 1.3.2.1b - Reasons why consumers may not aim to maximise utility: • the influence of other 1.3.2.2a - concept of 'demand'1.3.2.2b - distinction between movements along a demand curve and shifts of a demand curve 1.3.2.2c - concept of diminishing marginal utility and its significance for the shape of the 1.3.2.2d - Factors that may cause a shift in the demand curve: • changes in the price of 1.3.2.3a - concepts of 'price', 'income' and 'cross-elasticities of cross-elasticities demand'. of 1.3.2.3b - use formulae to calculate price, income and cross-elasticities of demand 1.3.2.3c - Interpretation of numerical values of price elasticity of demand: • perfectly price 1.3.2.3d - factors influencing price elasticity of demand: • availability of substitutes •1.3.2.3e - calculate total revenue 1.3.2.3f - price elasticity of demand varies along a straight line demand curve 1.3.2.3g - relationship between price elasticity of demand and total cross-elasticities revenue.1.3.2.3h - Interpretation of numerical values of income elasticity of (continued) demand: •1.3.2.3i - Interpretation of numerical values of cross elasticity of demand. Significance for the 1.3.2.3j - significance of price, income and cross-elasticities of demand for firms, consumers and

[Maximum number: 1]

In April 2020 electricity prices increased on average by 10% in the UK. In the same month, a record number of 668371 consumers switched to cheaper electricity suppliers.

Which one of the following can explain the behaviour of those consumers who switched to cheaper electricity suppliers?

Consumers experienced habitual behaviour

Consumers aimed to maximise their utility

Consumers had poor computational skills

Consumers aimed to minimise their utility

[Maximum number: 4]

In the USA 96 million consumers have never switched banks. 39% of consumers had accounts at the same bank as their parents. 13\% of consumers said that the process of switching involved too much time and effort.

With reference to switching banks, explain the difference between 'herding' and 'inertia'.

[Maximum number: 1]

Which one of the following will cause a movement along the demand curve in the market for rice?

An increase in the global population

An increase in real incomes

A decrease in the price of noodles

A decrease in the price of rice

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Covered syllabus points

1.3.2 - Consumer behaviour and demand question 1

1.3.2 - Consumer behaviour and demand question 2

1.3.2 - Consumer behaviour and demand question 3