2: Individual Economic Decision Makings Flashcards
Rational behaviour
Acting in pursuit of self-interests, which for a consumer means attempting to maximise the welfare, satisfaction or utility gained from the goods or services consumed
What is utility
The satisfaction or economic welfare an individual gains from consuming a good or service.
What is marginal utility
The additional welfare, satisfaction or pleasure gained from consuming one extra unit of good or service
What is hypothesis of diminishing marginal utility
For a single consumer, the marginal utility derived from a good or service diminishes for each additional into consumed.
What is bounded rationality
It is when making decisions, individuals rationality is limited by the information they have, the limitation of their minds, and the finite amount of time available in which to make decisions
What is bounded self-control
It is limited self-control in which individuals lack the self-control to act in what they see as their self-interest.
What is Cognitive bias
It Is a systematic error in thinking that affects the decision and judgements that people make.
What is Availability bias
It occurs when individuals make judgements about the likelihood of future events according to how easy it is to recall examples of similar events.
What is anchoring
It is a cognitive bias describing the Human tendency when making decisions to rely too heavily on the first piece of information offered. Individuals use an initial piece of information when making subsequent judgements.
Social norms
Firms or patterns of behaviour considered acceptable by a society or group within that society
What are Nudges
Factors which encourage people to think and act particular ways. Nudges try to shift group and Individuals behaviour in ways which comply with desirable social norms.
What is Altruism
It is when we act to benefits someone’s else’s wellbeing, even though we may suffer as a consequence ,either in terms of a financial or time loss, or by incurring personal risk.
What is choice architecture
It is a framework setting out different ways in which choices can be presented to consumers, and the impact of that presentation on consumer making
What is framing
How something is presented influences the choices people make
What is mandated choice
Chopo ices people are required often by law to make a decision
