Micro Flashcards
Define Behavioral Economics
Method of Economics Analysis that applies physiological insights to human behaviour to explain how individuals make choices and decisions
Define Rational Man
Self Intrest motivates people to elevate well-being and maximise ability
Define Utility
Satisfactiom or Welfare an individaul gains from consuming goods or services
Define Rule of Thumb
Rough or practical method/procedure that can easily be applied whne making decisons
Example of Rule of Thumb
Norm of we meet on a Friday
Define Bounded Rationality
Individuals ratioanlity is limited by information they have, limited minds and finite amount of time avalibale when making decisions
Example of Bounded Rationality
Choosing a new TV based reading few reviews and listening to friends despite lases man offering better deal
Define Bounded Self Control
Limited Self-Control where individuals lack control to act as what we as own self-interest
Example of Bounded Self Control
Valuing the now more than the future when making the big decisions
Define Fairness
Quality of being impartial involves treating people equally and not been taken advantage of them
Example of Fairness
Paying 1% to fund better public services
Define Choice Architecture
Framework setting out different ways which choices can be presented to consumers and impact of presentation on consumer decision making
Example of Choice Architecture
Getting children to eat healthier with layout of canteen
Define Framing
How something is presented influences choice made
Example of Framing
Labelling something as 90% fat-free instead of 10% fat to make it more appealing
Define Cognitive Bias
Mistake in reasoning or other mental thought processes occurring regardless of other information
Example of Cognitive Bias
People tend to focus on bad news over good news
Define Availability Bias
Individuals make judgements about future based on similar events
Example of Availability Bias
After reading, news reports about thefts people may think there is high chance of it happening than there really is
Define Anchoring
Human tendency when making decisions to rely heavily on the first piece of information given
Example of Anchoring
Picking apparently reasonable price objects becuase of one expensive one
Define Social Norms
Pattern/Forms of behaviour that are considered acceptable
Example of Social Norms
Attitudes towards drinking alcohol is negative norm
Define Economic Sanctions
Restricting imposed by regulation that restricts individuals freedom to behave
