Behavioural Economics

Question 1

Prospect theory

Answer 1

Theory that people are very sensitive to small losses from current wealth

Question 2

Framing effect

Answer 2

Same choice presented in 2 diff ways leads to diff decisions

Question 3

Departures from full rationality = classified in 3 ways

Answer 3

1) cognitive ability
2) limits to willpower
3) limits to self interest

Question 4

Behavioural economics

Answer 4

= study of economic behaviour that departs from full rationality