behavorial economics

Question 1

Rational and irrational consumers

Answer 1

rational= maximizing/saving resources
irrational= not maximizing/saving resources

Question 2

Biases

Answer 2

1. Rule of Thumb
   heuristic guideline that means making a decision based on experiance istead of unbiased analysis
2. Achoring Bias
   use of incomplete information to make decisions
3. Framing Bias
   How information is presented to the audience
   rational consumers would reamain unconditional
4. Availability Bias
   Information available most recently
5. Imperfect information
   lack of complete information hence unable to maximize utility
   The Lemon problem

Question 3

Choice architecture

Answer 3

Default choice : made due to habit or lack of interest
Restricted Choice: Limited due to government or authority
Mandated choice: Free choice between alternatives that are compulsory

Question 4

Nudge Theory

Answer 4

influences that consumer choice in a predictable way
without limmiting freesom ( sanctions/incentives)