Microeconomics: Individual Economic Agents Behavior

Economists analyze individuals' decisions as choices made without any budget constraints.

Microeconomics focuses on understanding the behavior of entire economies.

A budget constraint line shows the combinations of goods that are unaffordable for consumers.

Consumers approach their utility-maximizing combination of choices all at once, without considering trade-offs.

The horizontal axis on a budget constraint line represents the quantity of one good.

The approach based on looking at trade-offs in terms of marginal utility considers the benefits derived from consuming more of one good over another.

Behavioral economists believe that traditional economic models take into account people's state of mind.

People always make consistent and informed decisions based on rationality.

Behavioral economics integrates insights from psychology into economics to better understand decision-making.

Traditional economists believe that individuals always act like unemotional cost-benefit adding machines.

Behavioral economics explains why decisions might appear irrational due to the complexity of human emotions and states of mind.

According to traditional economists, losing a $10 bill and receiving an extra $10 in your paycheck would make you feel neutral.

Daniel Kahneman and Amos Tversky published their insights on behavioral economics in a 1979 article.

People tend to react more strongly to losses than to gains in the stock market, according to behavioral economists.

Behavioral economists are primarily focused on implementing mandatory regulations to guide people's financial decisions.

Procrastination and feeling overwhelmed can lead up to 20% of new employees not enrolling in retirement savings plans immediately.