Evaluate, with the aid of a diagram, whether the diminishing marginal utility theory of demand provides an adequate explanation of the market demand curve for all goods and services.
Evaluate whether marginal utility theory can fully explain the link between the changing price of a good and quantity demanded of that good.
Explain what is meant by a ‘consumer’s equilibrium position’ in indifference curve theory and how it can be used to form a demand curve.
One of the world’s first filmed singing commercials advertised a soft drink. It stated that, for the same price, consumers would get twice as much of that drink than that of its major rival. This made it cheaper and was similar to a price reduction. Its rival responded by an advertising campaign stating that its own drink was superior to the first firm’s inferior product.
Discuss whether it is possible to use diagrams from indifference curve theory to illustrate how a consumer might react to these two advertising campaigns.
A city bus company proposes to reduce passenger fares.
Explain whether consumers always buy more of a good at a lower price than a higher price. Consider what might be the effect on demand for bus journeys and the revenue of the bus company of the lower fares.
Compare the derivation of a demand curve for a product using the marginal utility theory with the derivation using indifference curve theory.
Discuss whether the existence of (i) inferior goods and (ii) advertising invalidates the underlying assumptions of those theories of demand.
It has been said that the aim in the allocation of resources should be to achieve the greatest happiness for the greatest number of people.
Discuss whether economics has anything to say about the best way to maximise welfare from the use of resources.
A number of consumers are deciding whether to buy a product. How far does economic theory explain the determination of the market demand curve for that product?
Discuss whether that theory is still valid if the producer decides to advertise the product, and consider the effects of the advertising on the demand curve for the product.
With a perfect market and a given income, economic analysis explains how a rational consumer decides the quantities of which products to demand. It cannot, though, explain what happens when incomes change or when businesses in imperfect markets manipulate prices.
Discuss whether you agree with this opinion about the economic analysis of consumer behaviour.