behavioural economics

• Behavioral economics aims to fill gaps in traditional economics by explaining real-life consumer decision making
• Behavioral economics is a replacement for traditional economics.

  False
• What is the central argument of behavioral economics regarding consumer rationality?

  Consumers are not always rational
• According to traditional economics, what is the primary goal of consumers when making decisions?

  Maximize utility
• Behavioral economists argue that consumers may face bounded rationality due to time constraints, overwhelming choices, or lack of information.
• Consumers in traditional economics are assumed to gather all available information before making decisions.
• Reasons for bounded rationality according to behavioral economics

  1️⃣ Consumers lack time

  2️⃣ Overwhelming choices exist

  3️⃣ Information is incomplete
• What does bounded rationality refer to in behavioral economics?

  Limitations on rational decision-making
• Heuristics are always rational methods for decision-making.

  False
• Consumers bounded by self-control may opt for immediate gratification over future benefits.
• How does bounded self-control influence consumer decisions?

  Prevents maximizing utility
• What is a satisficing decision in behavioral economics?

  A satisfactory but not optimal decision
• Match the behavioral economics concept with its description:

  Bounded rationality ↔️ Limitations on rational decision-making

  Bounded self-control ↔️ Inability to resist immediate gratification

  Heuristics ↔️ Mental shortcuts for decision-making
• Heuristics serve as mental shortcuts that simplify decision-making processes.
• What are cognitive biases in behavioral economics?

  Emotional, social, psychological influences