Chapter 1 Economic Psychology: History and Application Flashcards
Consumer Sentiment Index
measures consumers’ subjective feelings about their individual financial situation and overall economic conditions at present and in the future
-Critique:
– coarse(grob), simplified measure: attitudes and expectations are more complex
– objective economic factors also important
• Benefits:
- captures confidence in the national economy
- predicts economic developments
(Evaluation and expectation for general economic conditions, expectations for changes in the unemployment rate, Evaluation for price change , own Household position in the economie market etc.)
Opportunity costs
– costs that arise from selecting one alternative and therefore renouncing all other alternatives and their corresponding benefits
Production Possibilities Curve
Kurve zwischen eigenem Gut auf der Y-Achse und den Alternativen auf der X-Achse und dessen Qualität. Ausgewähltes Gut sollte auf der Kurve liegen
Profit maximisation principle
– maximum result possible with the given quantity of resources
Cost minimisation principle:
– given result with minimum of resources
Axioms
a) completeness (actors can rank alternatives into a preference order )
b) transitivity (consistent preference order over alternatives)
c) reflexivity (every bundle of alternatives is just as good as itself)
d) non-satiation (actors prefer to possess more of a good and not less)
e) continuity (loss of a specific quantity of a Good A can be compensated with receiving a specific quantity of another Good B )
f) convexity (actors possessing a small amount of Good A and a large amount of Good B will only be indifferent to the loss of part of A if they receive a proportionally larger quantity of B in return)
homo economicus
paradigm of a utilitymaximising and rationally behaving actor
financial pychology
subsection of economic pschology
tudies experience and behaviour when dealing with money or highly liquid investments
