The satisficing principle
Satisficing means a firm aims for an outcome that is 'good enough' rather than the best possible. Managers set a target — such as an acceptable profit level — and stop once they reach it.
Real World
Herbert Simon studied General Motors managers in the 1950s and found they aimed for a 'satisfactory' return on investment rather than the maximum possible, adjusting targets only when performance fell short.
Exam Focus
Contrast satisficing with profit maximisation in evaluation: argue that bounded rationality makes satisficing more realistic, but acknowledge it reduces allocative efficiency.
Price Elasticity of Demand
PED = % change in quantity demanded ÷ % change in price
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