Week 4 Flashcards
(37 cards)
What is the defintion of demand?
Demand is the willingness and ability to buy quantity of a good at a given price during a given time. Demand and price are inversely related.
What is the definition of supply?
Supply is the willingness and ability to sell quantity of a good at a given price during a given time. Supply and price are directly related.
Why is it not so simple to define risk profiles?
- People weight gains and losses differently.
- People weight probabilities differently.
- People weight magnitudes depending on a reference point.
What are the three prospect theory solutions?
- Reference Dependence
- Loss Aversion
- Diminishing Marginal Sensitivity
What is intrinsic motivation?
The inherent tendency to seek out novelty and challenges, to extend and exercise one’s capacities, to explore and to learn. Fostered by optimal challenges, freedom from negative evaluation, positive feedback, being able to perform behavior competently and autonomously. Hampered by control and external rewards.
What are three basic psychological needs to have for intrinsic motivation?
- Relatedness
- Competence
- Autonomy
What does the direction of a financial incentive mean?
Is the incentive a gain to be had or a loss to be avoided?
What does the form of a financial incentive mean?
Do you give cash, vouchers or free stuff.
Cash is more efficient, and most people prefer it
One problem of offering cash is that it might be spend on exactly that which the recipient should try to avoid.
What does the magnitude of a financial incentive mean?
Does size matter?
Especially relevant for monetary/cash
incentives – ‘Pay enough or don’t pay at all
What does the target of a financial incentive mean?
For what?
When offering incentives it is crucial to determine what should be incentivized:
- Process
- Intermediate
- Outcome
It is very important to incentivize something where the target has influence on.
What does the frequency/immediacy of a financial incentive mean?
Incentives can be structured such that they reward every occurrence of the healthy behavior, or over prolonged periods.
What does the schedule (fixed/variable) of a financial incentive mean?
Are incentives constant or varying (i.e. increasing/decreasing)
Could be relevant as people:
* Adapt to rewards
* Are more sensitive to changes than absolute amounts
* Care about sequences
* Do not want to break a ‘streak’
To what types of backfire can financial incentives lead?
- Self-efficacy: People only do things when they believe they have the skills required to perform the task
- Choking under pressure: Cash or rewards can increase stressand self-consciousness, such that
highly-skilled individuals ‘choke’ – fail to show their intended performance.
What does the elaboration likelihood model describe?
The 2 different routes a message can take:
- Central route -> Lasting change in attitude
- Peripheral route -> Temporary change in attitude
What does the health believe model describe?
- Perceived benefits vs. perceived barriers
- Perceived threat
- Self-efficacy
- Cues to action
-> Likelihood of engaging in health-promoting behavior
What does the transtheoratical model (stages of change) describe?
- Pre-contemplation
- Contemplation
- Determination
- Action
- Maintenance
What does the Lasswell (5 W’s) model of communication describe?
- Who
- Says What
- In Which channel
- To Whom
- With what effect
What is the definition of a negative externality?
An unpriced byproduct of production or
consumption that adversely affects another party
not directly involved in the market transaction.
* Cigarette smoking
* Secondhand smoke
* Healthcare costs (maybe not?)
* Pollution
* Drunk drivers
* COVID-19 infections
Which 2 common approaches for government intervention exist?
Command-and-control policies regulate behavior directly.
* Examples:
* limits on consumption
* Impose price caps
* mandatory behaviour
Market-based policies provide incentives so that private decision-makers will choose to solve the problem on their own.
* Examples:
* corrective taxes and subsidies
* tradable pollution permits
Out of which 2 components do social costs exist?
- Private costs (the costs directly incured by the sellers)
- External costs (due to an externality = value of the negative impact on bystanders)
What does internalising the externality mean?
Altering incentives so that people take account of
the external effects of their actions.
What does price elasticity of demand mean?
Price elasticity of demand is a measure of how much the quantity demanded of a good
responds to a change in the price of that good.
What is the formula of price elasticity of demand?
Price elasticity of demand = % change in quantity demanded / % change in price
What does inelastic demand mean?
- Percentage change in price is greater than percentage change in quantity demand.
- Price elasticity of demand is less than one
