Definitions-Topic 2: Individual economic decision making Flashcards
Altruism
The selfless and disinterested concern towards the wellbeing of others
Anchoring bias
Individuals tend to rely on the first piece of information they are given
Asymmetric information
When one party (buyers or sellers) has more information than the other in an economic transaction
Availability bias
Individuals base the likeliness of future events occurring on past events
Behavioural economics
Branch of economics that incorporates psychological insights to understand human economic decision making
Bounded rationality
Individuals inability to make rational economic decision making due to imperfect information , time constraints and limited mental processing ability
Bounded self control
Individuals inability to make rational economic decision making due to inability to control themselves
Choice architecture
A framework illustrating the effects of presenting choices in different ways
Economic man( Homo economicus)
A hypothetical person who behaves in exact accordance with their rational self interest
Heuristics
Rules of thumb
Hyperbolic discounting
Individuals tend to base the value of rewards on the amount of time taken to acquire the reward
Perfect information
When both buyers and sellers have full knowledge of goods and services in a market
Risk aversion
Individuals tend to value losses more than commensurate gains
Symmetric information
Where consumers and producers have sufficient information to make rational decisions
Utility
Benefit, well being , welfare or satisfaction gained from consumption of a good or service
Utility maximisation
When consumers aim to make their personal welfare as high as possible
