Question

a) Name and explain three serious problems associated with consumer interviews or surveys. Give an example of each one.

b) Explain how indifference curves and budget lines can change your thinking about an everyday task.

c) What are some factors that affect the price elasticity of demand?

Answer 1

The problems which related to the consumers or survey are as follows:
One of the major problems in the survey research is that the customers are always self-selected. The researches select some of the people to respond to their questions for the survey. They give the answers which the researchers want. For example, the researchers pay some of the people for answering the survey questions, and they answer the questions in the way which the researchers tell them.
Many at times the researches do self-reporting on based of past reports or behavior of the consumers. The difficulty rises in such cases when the want for that product changes from the past reports or consumers behaviors to the present report or consumer behavior.
Surveys usually result in bad prediction of future behavior of the consumers. For example, the questions in survey related to future technologies are not possible for the common consumers to reply to as they are not aware much of the future technologies and updates.

Indifference curve shows the different combination of two or more different commodities which the consumer is able to consume with the help of optimum utilization of the given income it shows the equilibrium level of satisfaction to the consumer.
The budget line shows a different combination of two different commodities which a consumer is able to purchase with unlimited income. Consumer equilibrium is existing at that point where IC intersects the budget line when IC is tangent to the budget line then consumer equilibrium situation is existing.
It is helpful in the day to day task for the consumer because the consumer is able to decide the thing that which commodity comes under the budget and which commodity does not come under the budget so it will easily solve the problem of the consumer to decide what to purchase and what not to purchase.

The factors affecting price elasticity of demand are:
1.Nature of the commodity, it includes the luxurious commodities and the necessary goods the elasticity for a luxurious commodity is elastic but the elasticity for necessity good days inelastic because we can't avoid the necessity goods.
2. Postponement is another factor, it means for those commodities which can be postponed for some time has elastic demand but which cannot be postponed for some time as inelastic demand.
3. The percentage of income on the total expenditure if the percentage of income and total expenditure is high then the demand is elastic on the other hand when the percentage of income on the total expenditure is less than the demand is inelastic.
4. Availability of substitute any substitute available for the commodity then it has elastic demand if the substitute for not available then it has an inelastic demand.