Individual economic decision making

• What is rational economic decision-making?

  Making choices to maximize utility
• What does utility theory study?

  How consumers derive satisfaction from goods
• What is total utility?

  Overall satisfaction from consuming goods
• What is marginal utility?

  Additional satisfaction from one more unit
• What does the hypothesis of diminishing marginal utility suggest?

  Additional satisfaction decreases with more consumption
• How does diminishing marginal utility support the demand curve?

  It explains the inverse price-quantity relationship
• Why is the margin important in decision-making?

  It determines the impact of small changes
• What is utility maximization?

  Achieving highest possible satisfaction
• Why is information important for decision-making?

  It enables rational and effective choices
• What is asymmetric information?

  One party has more information than another
• How does asymmetric information affect economic decisions?

  It complicates rational decision-making
• What is bounded rationality?

  Decision-making limited by various constraints
• What is bounded self-control?

  Struggling to act in long-term interests
• What are rules of thumb?

  Simple methods or mental shortcuts
• What is anchoring in decision-making?

  Over-relying on the first piece of information
• What is availability bias?

  Judging likelihood based on recent experiences
• How do social norms influence economic decisions?

  Encouraging conformity to societal behaviors
• What is the role of altruism in decision-making?

  Acting to benefit others at personal cost
• How does fairness affect economic decisions?

  Individuals may choose fair options over rational ones
• What is choice architecture?

  Structuring choices to influence decisions
• What is framing?

  Presentation of information affects perception
• What are nudges?

  Subtle interventions encouraging better decisions
• What is a default choice?

  Pre-selected option individuals often stick with
• What is restricted choice?

  Limiting options to guide decision-making
• What is mandated choice?

  Requiring explicit decisions from individuals
• How can behavioural economics assist policymakers?

  Designing interventions to improve social outcomes
• How does bounded rationality challenge traditional economic theory?

  It suggests individuals don't always make rational decisions
• What is the significance of marginal utility in pricing?

  It explains why prices decrease with quantity demanded
• What are the consequences of imperfect information in markets?

  It leads to inefficiencies and resource misallocation
• How do biases in decision-making affect consumer behavior?

  They lead to irrational choices deviating from rationality
• Why is altruism considered in behavioural economics?

  It shows decisions can be non-self-serving
• How does choice framing impact consumer decisions?

  The presentation alters preferences and outcomes
• What role do nudges play in economic policy?

  They guide better choices while preserving freedom
• How does the hypothesis of diminishing marginal utility shape consumer demand?

  It explains less buying as more is acquired
• Why is bounded self-control significant in behavioral economics?

  It shows consumers fail to act in their best interest
• How does asymmetric information create market failure?

  It leads to adverse selection or moral hazard
• What are examples of rules of thumb in economic decision-making?

  “Buy the cheapest option” or “Follow majority”
• How does availability bias distort economic decisions?

  It overemphasizes recent experiences, ignoring others
• What is the relationship between framing and consumer behavior?

  Presentation influences decisions, even with identical options
• How does mandated choice work in practice?

  Requires explicit decisions instead of defaults