Micro - Individual Economic Decision Making Flashcards
What is altruism?
The selfless and disinterested concern towards the wellbeing of others.
What is anchoring bias?
Individuals tend to rely on the first piece of information they are given.
What is asymmetric information?
When one party (buyers or sellers) has more information than the other in an economic transaction.
What is availability bias?
Individuals base the likeliness of future events occurring on past events.
What is behavioural economics?
Branch of economics that incorporates psychological insights to understand human economic decision making.
What is bounded rationality?
Individuals’ inability to make rational economic decisions due to imperfect information, time constraints, and limited mental processing ability.
What is bounded self-control?
Individuals’ inability to make rational economic decisions due to inability to control themselves.
What is choice architecture?
A framework illustrating the effects of presenting choices in different ways.
What is economic man (‘Homo economicus’)?
A framework structuring the mind and decision making of a perfectly economic and rational human being.
What are heuristics?
Rules of thumb.
What is hyperbolic discounting?
Individuals tend to base the value of rewards on the amount of time taken to acquire the reward (longer waits, less valuable).
What is perfect information?
Both buyers and sellers have full knowledge of goods and services in a market.
What is risk aversion?
Individuals tend to value losses more than commensurate gains.
What is symmetric information?
Where consumers and producers have sufficient information to make rational decisions.
What is utility?
Benefit/wellbeing/welfare/satisfaction gained from consumption of a good or service.
What is utility maximisation?
When consumers aim to make their personal welfare as high as possible.
