Behavioural Economic Theory (AQA A-Level Economics): Flashcards

Psychology insights combined with economic analysis

Individuals are perfectly rational, informed, self-interested

Limited information, mental processing ability, and time

Accepting 'good enough' outcomes rather than optimal choices

Fast, intuitive, instinctive, automatic with little effort

Slow, reflective, deliberate, requires concentration

Systematic error in thinking affecting judgements and decisions

Overweighting event probability due to easily recalled examples

Relying too heavily on first information encountered (anchor)

Nudges influence choice without penalties; sanctions restrict