1.2.10

Question 1

Behavioural economics

Answer 1

The branch of economics that recognises economic agents may not always behave rationally

Question 2

Rational consumers

Answer 2

Consumers who act in their own self interest, are maximisers, have well defined preferences, and can use any amount of information to good effect. They are utility maximisers. (Econs)

Question 3

Bounded rationality

Answer 3

Where in certain circumstances (eg. large amounts of complex and/or unfamiliar information) there may be limits to the rationality of economic agents

Question 4

Heuristics

Answer 4

A simple rule of thumb used by economic agents to reduce cognitive load

Question 5

Social norm

Answer 5

Beliefs held by people about how to behave

Question 6

Habitual behaviour

Answer 6

The heuristic that leads to inertia

Question 7

Bounded self-control

Answer 7

When economic agents lack the ability to moderate particular behaviours

Question 8

Nudges

Answer 8

A factor (or in the case or government, a policy) that influences irrational economic agents but would not influence rational economic agents

Question 9

Altruism

Answer 9

The phenomenon in behavioural science for humans to behave with more kindness and fairness than would be the case if they behaved rationally

Question 10

Anchoring

Answer 10

The use of (usually) irrelevant information as a reference point for helping to make an estimate of an unknown piece of information. People use an “anchor point” of an event or value that they know in order to make a decision or estimate

Question 11

Choice architecture

Answer 11

The environment in which someone must make a decision or choice has been carefully designed in order to try and influence that decision

Question 12

Habit

Answer 12

Rigid pattern of behaviour followed by a person

Question 13

Herd behaviour

Answer 13

Individuals act collectively as part of a group, often making decisions as a group that they would not like to make as an individual

Question 14

Mandated choice

Answer 14

A situation or scenario in which people must make a decision in advance with respect to whether they wish to participate in a particular action - they are required by law to make that choice eg. deciding whether to donate your organs or not when you die

Question 15

Restricted choice

Answer 15

Restricts the number or available choices making it more likely to cause consumers to act and actually make a decision (instead of finding it too hard to make a choice), resulting in a more efficient outcome