Behavioural Economics Study Guide:
110 Well Defined terms and questions with
certified solutions 2024 update
Marginal Utility
✔The pleasure derived from consuming one more unit of a good or service.
Utility
✔Happiness, usefulness or pleasure.
Asymmetric Information
✔Where one person involved in an economic transaction has knowledge about
the transaction that another participant lacks.
Altruism
✔Any act that benefits the wellbeing of others at the expense of one's own
utility.
Rule of Thumb
✔A decision making shortcut that leads to individuals making a choice based
upon a simple rule rather than rational analysis.
, Behavioural Economics Study Guide:
110 Well Defined terms and questions with
certified solutions 2024 update
Social Norms
✔Common practices and beliefs that influence individual's behaviour and lead to
irrational decisions.
Anchoring
✔The process whereby irrelevant information provided influences the
figure/quantity an individual provides (e.g. as an amount they are willing to pay)
Availability Bias
✔Making decisions based upon the most easily accessible information rather
than all the information available.
Nudges
✔Subtle methods used by the Government to influence behaviour that don't use
legislation or tax.
Paradox of value
✔The phenomenon whereby goods that are more important to human welfare
have a lower price than less important goods.
, Behavioural Economics Study Guide:
110 Well Defined terms and questions with
certified solutions 2024 update
Choice Architecture
✔Restricting options available to consumers or presenting options in a way that
pushes people towards making one choice rather than another (e.g. making the
default choice the one you want people to take.).
Framing
✔Presenting information and choices in such a way as to influence individuals'
perceptions of the information and in turn their decisions.
Behavioural Economics
✔Field of economics that draws on psychology to better explain and predict the
decisions individuals will make
Bounded self-control
✔When individuals lack the self-discipline to see their rational good intentions
through
Heuristics
✔Mental shortcuts used in decision making to allow economic agents to make
judgments more quickly.
110 Well Defined terms and questions with
certified solutions 2024 update
Marginal Utility
✔The pleasure derived from consuming one more unit of a good or service.
Utility
✔Happiness, usefulness or pleasure.
Asymmetric Information
✔Where one person involved in an economic transaction has knowledge about
the transaction that another participant lacks.
Altruism
✔Any act that benefits the wellbeing of others at the expense of one's own
utility.
Rule of Thumb
✔A decision making shortcut that leads to individuals making a choice based
upon a simple rule rather than rational analysis.
, Behavioural Economics Study Guide:
110 Well Defined terms and questions with
certified solutions 2024 update
Social Norms
✔Common practices and beliefs that influence individual's behaviour and lead to
irrational decisions.
Anchoring
✔The process whereby irrelevant information provided influences the
figure/quantity an individual provides (e.g. as an amount they are willing to pay)
Availability Bias
✔Making decisions based upon the most easily accessible information rather
than all the information available.
Nudges
✔Subtle methods used by the Government to influence behaviour that don't use
legislation or tax.
Paradox of value
✔The phenomenon whereby goods that are more important to human welfare
have a lower price than less important goods.
, Behavioural Economics Study Guide:
110 Well Defined terms and questions with
certified solutions 2024 update
Choice Architecture
✔Restricting options available to consumers or presenting options in a way that
pushes people towards making one choice rather than another (e.g. making the
default choice the one you want people to take.).
Framing
✔Presenting information and choices in such a way as to influence individuals'
perceptions of the information and in turn their decisions.
Behavioural Economics
✔Field of economics that draws on psychology to better explain and predict the
decisions individuals will make
Bounded self-control
✔When individuals lack the self-discipline to see their rational good intentions
through
Heuristics
✔Mental shortcuts used in decision making to allow economic agents to make
judgments more quickly.
