Behavioral Economics and Conventional Decision-Making Models

Play an AI-generated podcast conversation about this lesson

What term do behavioral economists use to describe the way people actually behave?

Satisficing (correct)

Rationalizing

Optimizing

Maximizing

What concept involves mental shortcuts that allow people to make judgments quickly and efficiently?

Bounded rationality (correct)

Forecasting

Maximizing

Rational expectations

What do some behavioral economists argue about using heuristics in decision-making?

They are irrelevant in behavioral economics

They always lead to optimal results

They are only used by expert decision-makers

They typically result in errors and biases (correct)

Which term is used to describe decision-making shortcuts or heuristics according to the text?

Satisficing Signup and view all the answers

In behavioral economics, what is the term used for the way in which people actually behave?

Boundedly rational Signup and view all the answers

What do behavioral economists refer to as mental shortcuts that allow quick and efficient judgments?

Bounded rationality Signup and view all the answers

What is the main goal of behavioral economics?

To study the behavior of individuals in real-world situations Signup and view all the answers

How does behavioral economics differ from conventional economics?

It enriches economic analyses with insights from psychology and neuroscience. Signup and view all the answers

In behavioral economics, what influences people's decisions?

Passion and reason Signup and view all the answers

What is one key benefit of using insights from psychology in economic analyses?

Enhancing the realism of economic models Signup and view all the answers

What are some factors that behavioral economics considers when studying decision-making?

Emotions and reason Signup and view all the answers

How does behavioral economics contribute to economic analyses compared to traditional economics?

By incorporating insights from various fields like sociology and law Signup and view all the answers

According to behavioral economics, how do people feel about losses?

People despise losses and are willing to sacrifice income to avoid them. Signup and view all the answers

How does traditional economics differ from behavioral economics in terms of decision making?

Traditional economics focuses on maximizing wealth, while behavioral economics considers emotions and intuition. Signup and view all the answers

What concept refers to people's reluctance to let go of lost causes or avoid ambiguous outcomes?

Loss aversion Signup and view all the answers

How do emotions and intuition influence decision making in behavioral economics?

They build on memories of past experiences and understandings. Signup and view all the answers

What drives people to sacrifice income and wealth in behavioral economics, even when faced with risks?

The fear of failure and loss aversion. Signup and view all the answers

What term describes the phenomenon where individuals are willing to punish cheats and free riders even at the expense of their income?

Fairness tendency Signup and view all the answers