Behavior Economics

Question 1

What is economics?

Answer 1

how society allocates scarce resources and goods

Question 2

What are resources?

Answer 2

inputs (labor, capital, and land) that society uses to produce output

Question 3

What are goods?

Answer 3

provided by barbers, doctors, and police can be clothes, food, or housing

Question 4

What is production?

Answer 4

converting inputs to outputs

Question 5

What is the driving force of economics?

Answer 5

scarcity

Question 6

What is market?

Answer 6

allowing trade with one another

Question 7

What is a market system?

Answer 7

the collection of markets and their relationships

Question 8

What is demand?

Answer 8

willingness to buy a good

Question 9

What is supply?

Answer 9

willingness to supply a particular good

Question 10

What is the demand curve?

Answer 10

inverse relationship between supply and demand and the curve represents the demand schedule

Question 11

What causes demand change?

Answer 11

1. changes in price
2. income
3. preference
4. expectations

Question 12

What causes supply change?

Answer 12

1. change in prices
2. changes in the prices of inputs (increase or decrease of raw material)
3. cahnges in technology (is it cheap or expensive to make)

Question 13

Classical Economic Theory

Answer 13

economy will self-regulate and naturally lean to equilibrium
(self-adjustment mechanisms)

Question 14

What is opportunity cost?

Answer 14

benefits that are given up by choosing an alternative
(basic decision making)

Question 15

Characteristics of Classical Economics

Answer 15

• assume everyone is rational
• all know preference
• consumers preference and decision path are independent
• consumer make mistakes
• people use system 2 thinking
• takes time

Question 16

Characteristics of Behavioral Economics

Answer 16

• not everyone is rational
• people’s preferences shine
• preferences are path dependent
• people make mistakes
• both system 1 and system 2 are used

Question 17

System 1 Thinking

Answer 17

automatic and effortless thinking
- skilled decision making because of prior experience

Question 18

System 2 Thinking

Answer 18

slower, effortless thinking
- can tell you in great detail how you make decisions

Question 19

What is the Endowment Effect?

Answer 19

people value something more highly once they have it

Question 20

What is framing?

Answer 20

gains and losses are viewed differently

Question 21

What is the thought process behind classical economics?

Answer 21

“you can see through this and choose based on the facts regardless of how presented”

Question 22

True or False: People usually do not regard healthcare rationally

Answer 22

True

Question 23

Inelastic demand

Answer 23

when services are vital consumers will not be price sensitive

Question 24

Universal demand

Answer 24

healthcare is used by all

Question 25

True or False: Within healthcare, illness is predictable

Answer 25

False

Question 26

provider/supplier- induced demand:

Answer 26

physicians are in a unique position because they can control supply and demand for goods and services

Question 27

market forces

Answer 27

an example of transparency of information

Question 28

What are some healthcare incentives?

Answer 28

1. population size
2. duration of treatment
3. intensity of services

Question 29

What is efficiency?

Answer 29

the lowest cost per unit output; best allocation of resources that optimize productivity

Question 30

What is efficacy?

Answer 30

how a product works; positives outweigh the negatives

Question 31

What is effectiveness?

Answer 31

how a product works in the real world in those individuals for whom it was intended