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Flashcards in Micro A2 Deck (16)
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1
Q

Rational behaviour

A

Acting in pursuit of self interest which for a consumer means attempting to maximise welfare satisfaction or utility gained from goods or services consumed

2
Q

Utility

A

The satisfaction or economic welfare an individual gains from consuming a good or service

3
Q

Marginal utility

A

the additional welfare, satisfaction or pleasure gained from consuming one extra unit of a good

4
Q

When is utility maximised

A

When the marginal utility is 0

5
Q

Law of diminishing marginal utility

A

Marginal utility at first rises but then falls with consumption

6
Q

Constraints of utility maximisation

A
Limited income 
Given set of prices
Budget constraints 
Limited time
(Info?)
7
Q

Asymmetric information

A

When one party to a market transaction possesses less information relevant to the exchange than the other

8
Q

Behavioural economics

A

A method of economic analysis that applies psychological insights into human behaviour to explain how individuals make choices

9
Q

Bounded rationality

A

When making decisions an individuals rationality is limited by the information they have, their minds and the time available

10
Q

Bounded self control

A

Limited self control in which individuals lack the self control to act in what they see as their best interests

11
Q

Cognitive bias

A

Mistake in reasoning or thought process occurring as a result of using a rule of thumb or holding onto a belief or preference despite evidence

12
Q

Availability bias

A

Individuals make judgments about the likelihood of events occurring based on how easily they can remember a similar event

13
Q

Anchoring

A

Tendency to rely too heavily on the first piece of evidence offered

14
Q

Economic sanctions

A

Restrictions imposed by regulations or laws that restrict an individuals freedom to behave in certain ways

15
Q

Nudges

A

Factors that encourage people to think and act in certain ways, they try and shift peoples behaviour to comply with desired patterns

16
Q

Choice architecture

A

A framework setting out different ways in which choices can be presented to consumers and the impact that presentation on the consumers decisions