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Economics 1.2.10
Economics- Edexcel 1.2.10
| Term | Definition |
|---|---|
| rational behaviour | a decision-making process that is based on making choices that result in the optimal level of benefit or utility for an individual |
| social norms | shared standards of acceptable behaviour by groups |
| status quo | a Latin phrase meaning the existing state of affairs, particularly with regard to social, political, religious or military issues |
| rules of thumb | a rule or principle that you follow which is not based on exact calculations, but rather on experience |
| habitual behaviour | a rigid pattern of behaviour followed by a person |
| default role | pre-set courses of action that take effect if nothing is specified by the decision maker |
| bounded rationality | the idea that we make decisions that are rational, but within the limits of the information available to us and our mental capabilities |
| bounded control | behaviour where individuals lack the cognitive 'strength' (or willpower) to make a rational decision |
| heuristics | mental shortcuts for solving problems in a quick way that delivers a result that is sufficient enough to be useful given time constraints |
| hyperbolic discounting | a cognitive bias, where people choose smaller, immediate rewards rather than larger later rewards and this occurs more when the delay is closer to the present than the future |
| default choices | option selected if a consumer does nothing and it doesn’t involve mental effort |
| satisficing | a decision-making process that strives for adequate rather than perfect results |
| anchoring | describes the subconscious use of irrelevant information as a fixed reference point (or anchor) for making subsequent decisions about that security |
| priming | behaviour is often influenced by cues that work subconsciously and prime us to behave / choose in certain ways |
| framing | when our decisions are influenced by the way information is presented |
| altruism | willingness to bear a cost to benefit somebody else |
| availability heuristic | mental shortcut that relies on immediate examples that comet o mind |
| behavioural economics | applying psychological insights into human behaviour |
| butterfly effect | when small details make big differences to choices we make |
| choice architecture | careful design of how options are presented can influence decisions |
| choice overload | when there are too many options to make a fully informed rational decision |
| commitment contract | when someone voluntarily loses money if they do not engage in a future behaviour to which they have committed |
| compromise effect | options chosen more often when they are the compromise option in a choice set |
| computational weakness | occurs when consumers find it difficult to calculate the probability of something happening when they make purchasing decisions |
| confirmation bias | seeking out information in a way that fits with our existing preconceptions |
| endowment effect | when we value things that we own more than the things we do not own |
| gambler’s fallacy | belief that future probabilities are altered by past events when in fact they are independent |
| herd behaviour | when individuals act collectively as part of a group |
| IKEA effect | placing a disproportionately high value on objects we have partially assembled ourselves |
| intention-action gap | when people often don’t accomplish what they would like to do |
| loss aversion | when a loss is more painful than an equivalent gain is rewarding |
| mental accounting | idea that the way money is categorised influences how it is spent |
| nudge | minimal change to the environment to alter behaviour in an easy, timely, social way |
| psychological bias | any systematic deviation from a rational choice |
| scarcity bias | we value things that are more limited in number or are only available for a short time |
| social image | humans present themselves to look good to others to produce positive rewards |
| social proof | when an individual looks to the behaviour of their peers to inform their decision-making |
| status quo biases | preference to keep things the way they are |
| sunk cost effect | people tend to consume what they have prepaid for even if it does not make sense to do so |
| system1 thinking | decisions made on autopilot |
| system 2 thinking | slower, careful, effortful decision-making |
Created by:
jessharris
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