Individual Economic Decision Making Flashcards
What is utility
The satisfaction or economic welfare an individual gains from consuming a good or service
What is marginal utility
The additional welfare, satisfaction or pleasure gained from consuming one extra unit of a good or service
What is the diminishing marginal utility
For a a single consumer, the marginal utility derived from a good or service diminishes for each additional unit consumed
What is asymmetric information
When one party to a market transaction, either buyer or seller possesses less information relevant to the exchange then the other
What does bounded rationality mean
When making decisions, individuals rationality is limited by the information they have, the limitations or their minds, and the finite amount of time available in which to make decisions.
What does bounded by self control mean
Limited self control in which individuals lack the self control to act in what they see as their self interest
What is cognitive bias
A systematic error in thinking, that affects the decisions and judgments that people make
What is availability bias
Occurs when individuals make judgements about the likelihood of future events according to how easy it is to recall examples of similar events
What is anchoring
