A-LevelEconomicsThe price system and the microeconomy9708/42 · Feb/Mar 2018 · Q225 Marks
The UK Government has established a behavioural insight team known as the 'nudge unit,' which attempts to change consumer behaviour by persuasion.
- Explain how indifference curve theory predicts a consumer will react to changes in income and changes in the price of a product in order to maximise satisfaction. Consider whether the use of 'nudge' theory (persuasion) conflicts with this theory of maximising satisfaction.[25]
Mark scheme
Marking points from the official mark scheme (Feb/Mar 2018). The mark or mark type is shown in brackets.
- Theory states that consumers maximise satisfaction by relating utility to price; this is shown by indifference curves and budget lines. Income changes shift budget lines parallel; price change of one good causes a budget line to pivot. Equilibrium is changed – the extent and direction depending on the type of good. Nudge theory seeks to persuade. It could be represented by a change in perceptions or taste shown by the shape of the indifference curve. It does not invalidate the notion of equilibrium and maximising satisfaction according to the new shape of the curve.
- L4 (18-25) for a clear analysis of ICs and an explanation of income and price changes, a link between nudge theory and with a concluding paragraph.
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