UNIT 1 AOS 3

Question 1

Bounded self interest

Answer 1

Willing to sacrifice their own interests to help others

e.g., Donations because u think it is good

Question 2

Status quo bias

Answer 2

Shortcut, Fail to examine (look at) all ** options**
Sticking with **previous decided **

e.g., Contract about to expire, u swap because u want to keep everything the same

Question 3

Bounded Willpower

Answer 3

People may not have the necessary willpower or determination to make rational decisions

e.g., Quit smoking (people say they want to quit, but they cannot)

Question 4

Heard Behaviour bias

Answer 4

Follow what the rest of their** peers **are doing

e.g., People want apple because of a crowd

Question 5

Framing Bias

Answer 5

Presented information difference even though it is the same

e.g., They say 80% of people are happy instead of saying 20% are sad

Question 6

Anchoring effect

Answer 6

Affects consumers awareness (perception) -> Manipulate consumer choice

Start or reference point

e.g., When u see a car that’s $10,000 then u see another car that’s $5000, u think $5000 is cheap

Question 7

Overconfidence bias

Answer 7

Overestimate their current knowledge

e.g., Overconfidence to start a business but probs fail

Question 8

The nudge

Answer 8

Something that catches(reminds) eye to change behavior

Question 9

Traditional economics

Answer 9

traditional economics uses models with assumptions to explain the behaviour of economic agents

Traditional economics studies the behaviour of the economy that does not include psychology, but rather the economic theory that is based on assumptions that describes how economic agents make particular decisions.

Diff: Behavioral illustrates a more complete picture of the economy because it is not based on assumptions like traditionally economics

Question 10

Behavioural Economics

Answer 10

a study that mixes psychology and economics, to better understand the behaviour of the economic agents

Behavioural economics gives an insight psychology within economics to give more of a complete understanding of how economic agents behave that includes biases and the limits on their rationality.

Diff: Behavioral illustrates a more complete picture of the economy because it is not based on assumptions like traditionally economics

Question 11

BOUNDED RATIONALITY

Answer 11

**Limits **on consumer rationality, MAY take mental shortcuts

Do not always have ** complete ** information

people are likely to take more risks when they are happy and less likely to take risks when they are frightened