behavioural economics

Question 1

disputes idea consumers are alway

Answer 1

rational and utility mixmising

Question 2

dispute idea consuemrs always ratinoal and utility maximising - instead ….

Answer 2

emotional , social and psychological factors influence descision making

Question 3

why is behavioural econ good

Answer 3

fills in gaps where trad econ fails to explain certain situations and gives us greater nderstnind go f desciosn making

Question 4

if a cosumer is making a ultilty maxmising raitnal condition what will happen

Answer 4

gather all teh info

weigh it up - cost and beenfits of info

take tiem to consider all info

make rational utility maximisng utility descision

Question 5

behavioural econ says consumers not always rational therfore

Answer 5

dont alwyas look to maximise utlity as rationalit might be bounded or consumers may have bounded self contorl

Question 6

what is bounded rationality

Answer 6

idea that cognitive descison making capacity of humans cannot be fully ratinal due to a number of impacts we face

Question 7

how can rationality be bounded in 3 ways

Answer 7

time choice info

Question 8

explain bounded ratilanitly in terms of time

Answer 8

consumers may not have time to do all of research and therfore make a full aided satisfactory utlity maximisng descison

Question 9

explain bounded ratinality int erms of choice

Answer 9

so large to evaluate all eh costs and benfits of buying something is too much whihc cna overhwelm consumers causing them not to ake ultity maixing choice

Question 10

explain bounded ratilnailty in terms of info

Answer 10

lack of info

asymettric infi

really complex

Question 11

what is bounded self ocntorl

Answer 11

individual lacks congitive strenght or will power to make a raitnoal descision

Question 12

explain boudned sel control with sugary drinks

Answer 12

know consuming drink daily is bad for them due to health realted issues

want to stop but cant due self ocntorl - theyre adddicted to sugar nic etc

consumer knows benefts of gym something stops us from doing that - will poower

prevent us making descions that maxes our utlity

Question 13

cause of bounded rationality and self control what wil consuemrs do

Answer 13

sometimes follow heuristics (mental shortcuts/rule of thumb)

which allows a satisficing descions to be made

Question 14

what is a satisficicing descison

Answer 14

utility may be sacrificed but a satisfactory outcome will be the end result

this makes the desicison easy to make and allows some utility to be gained

Question 15

what are cognitive biases

Answer 15

cognitive , social , emoitonal , psychological factors that can infleunce DM