behavioural economics

Question 1

what does behavioural economics argue

Answer 1

that individuals are not fully rational in the way traditional economic theory assumes and they often suffer from behavioural biases when making decisions. This can interfere with their decision making

Question 2

what is bounded rationality

Answer 2

When making decisions, individual’s rationality is limited by the info they have, the limitations of their minds and the time available to make the decision

Question 3

effect of bounded rationality on complex situations

Answer 3

Often causes satisfying rather than maximising choices

Question 4

what is bounded self-control

Answer 4

when individuals lack the self-control to act in what they see as their self interest. Whereas traditional economic theory assumes individuals have complete self-control when making decisions