What are the factors that determine a buyer's purchasing decision?
What will be an ideal response?
a) Tastes and Preferences: The amount of benefits that a buyer receives from consuming goods and services is a direct result of his tastes and preferences. Thus, out of a set of all things that a buyer can purchase, he will decide to purchase the good or service that gives him maximum satisfaction, which is a function of his tastes and preferences.
b) Prices of goods and services: Prices of goods and services are the most important determinants of a buyer's purchasing decision. When considering prices, the buyer not only considers the price of the good she is considering for purchase but also the prices of all other available goods.
c) The budget set: The final component of the buyer's problem is the income she has available to spend on goods and services. This is represented by the budget constraint, which shows all possible bundles of goods and services that exactly exhaust her income.
You might also like to view...
Refer to Figure 5-4. Why is there a deadweight loss?
A) because the marginal social cost of producing each additional unit in excess of Q2 exceeds the marginal benefit B) because the marginal social benefit of producing each additional unit in excess of Q2 exceeds the private cost C) because the marginal private cost of producing each additional unit in excess of Q2 exceeds the marginal benefit D) because the marginal private benefit of producing each additional unit in excess of Q2 exceeds the social cost
In the production function Y = A(G,P,T) F(K,R,H,N), the factors that affect the entire production process are
A) G,R,H. B) G,P,T. C) P,T,K. D) KRHN.