LS7 - Decision Making In Economics

Question 1

Deduction

Answer 1

This is when assumptions on economic behaviour are made using a hypothesis

Question 2

Induction

Answer 2

Collecting evidence to make assumptions on the behaviour of economic agents

Question 3

How do firms make rational decisions

Answer 3

• They aim to maximise profit and produce minimal waste. They produce goods efficiently

Question 4

What do economic agents require to make rational decisions

Answer 4

Time
Information
Ability to process information

Question 5

Behavioural Economics

Answer 5

• A school of economic thought based on evidence to develop economic assumptions

Question 6

Behaviours that prevent economic decisions

Answer 6

Habitual Behaviour - Consumers act out of habit
Consumer Inertia - Consumers are unsure so continue acting out of habit