Behavioural economics

Question 1

What is behavioural economics

Answer 1

Using insight from psychology to explain why humans make irrational decisions

Question 2

What is neoclassical economics

Answer 2

Relates supply and demand to an individuals ability to maximise profits or utility

Question 3

Information failure

Answer 3

When an information gap arises due to buyers and/or sellers not having complete information

Question 4

Altruism

Answer 4

Concern for the well-being and happiness or other humans over oneself

Question 5

Bounded rationality

Answer 5

Economic actors have limited information, limited lime to process the information and don’t spend enough time making an optimal decision

Question 6

Bounded self control

Answer 6

Economic actors make decisions based on emotions such as greed and pleasure rather than taking the rational view that is in their best interest. e.g. overconsumption of food

Question 7

Nudges

Answer 7

Form of choice architecture that aim at changing the actions of consumers without taking their freedom of choice away.

Question 8

Anchoring

Answer 8

Relying on first piece of information we are given. This causes bias towards subsequent data

Question 9

Availability

Answer 9

When previous experiences influence decision making, causing emotional responses

Question 10

Choice architecture

Answer 10

How choices are framed to consumers

Question 11

Heuristics

Answer 11

Convenient way of solving problems with imperfect information and limited time to make a decision.