Question

Eeach of the following, what is the mistake that underlies the statement? Explain the mistake in terms of supply and demand and the factors that influence them.

1. Consumers are illogical because they are buying more Starbucks beverages in 2016 despite the fact that Starbucks has raised prices from 10 to 30 cents per drink.

2. Consumers are illogical because they buy less at Cost-U-Less Warehouse Superstore when their incomes go up.

3. Consumers are illogical for buying an iPhone 7 when an iPhone 5 costs less.

Answer 1

1. A consumer is rational while purchasing a commodity. A rational consumer purchase more units of a commodity when its price falls and less units when the price increase. If consumers are buying more units when the price increases, they are illogical or irrational. The statement is right and there is not mistake.

2. The demand is influenced by the income of the consumers. Consumers purchase more when their income increase and purchase less quantities when their income decrease. If they buy less when their income increases, they are irrational. The statement is right, there is no mistake.

3. A rational consumer behaviour states that if the price of an iPhone is less, the consumer is supposed to purchase an iPhone. It means when cost less the consumers are ready to purchase. The statement is wrong because nothing is wrong with purchasing an iPhone when it cost less. A consumer purchasing an iPhone when its cost less is a rational consumer.