Individual Economic Decision Making

Question 1

Utility

Answer 1

The amount of satisfaction that a consumer gains from consuming a good or service

Question 2

Rational consumer

Answer 2

consumer acts in a way to maximise satisfaction when they spend money on goods and services

Question 3

Marginal utility

Answer 3

the satisfaction gained from consuming an additonal unit of a good or servies

Question 4

Diminishing marginal utility

Answer 4

as consumers consume more units of a good or service, the additional units give smaller increases in total satisfaction

Question 5

Choice architecture

Answer 5

influencing consumer choices by the way the choices are presented

Question 6

Framing

Answer 6

Example of choice architecture

- influencing consumer choices by the way words and numbers are used

Question 7

Nudges

Answer 7

Example of choice architecture

• influencing consumer behaviour via gentle suggestions and positive reinforcement
• can change people’s behaviour into one more socially desirable without taking away freedom of choice
• more cost effective alternative to the use of laws, regulations

Question 8

Default choice

Answer 8

Example of choice architecture

Question 9

Mandated choice

Answer 9

Example of choice architecture

-where people are legally required to make a choice

Question 10

Restricted choice

Answer 10

Example of choice architecture

-giving consumers a limited number of options when making a choice