Behavioural Economics (Quizlet Revision Activity)

Here is a quizlet revision quiz on some key behavioural economics key terms.

Here are some key behavioural economics terms to revise:

Altruism - When humans behave with more kindness and fairness than if they behaved rationally

Anchoring - Use of (usually) irrelevant information as a reference point to help make an estimate of an unknown piece of information

System 1 Thinking - When people consider what automatically comes to mind, it is effortless and intuitive.

Bias - A systematic deviation from what is believed to be rational choice

Choice Architecture - When the environment in which someone must make a decision has been carefully designed to try and influence that decision

Hindsight bias - Tendency to see events in the past as having been predictable

Sunk cost bias - Tendency to continue a behaviour as result of previously invested resources (such as time, money or effort)

System 2 thinking = Decision making that is slow, controlled, considered and conscious

Habit - A rigid pattern of behaviour

Default choice - Option that a consumer selects if he or she does nothing

Herd behaviour - Phenomenon in which individuals act collectively as part of a group

Endowment effect - People tend to value things they own more than others value them

Heuristic - When we use a rule of thumb to make a decision more quickly

Loss aversion - When people fear potential loss from an action more than an equivalent potential gain

Mental accounting - When people treat money differently depending on its source and its intended/planned use.

Nudge = Technique used by choice architects to change someone's behaviour in an easy and low-cost way, without reducing the number of choices

Priming = Cues that work subconsciously and prime us to behave / choose in certain ways

Reciprocity - Returning another's action with another equivalent action

Placebo effect - When an external stimulus (such as a sugar pill) can have an impact on the effectiveness of treatment even if the medication or procedure is fake.

Gambler's Fallacy - Mistaken belief held by some people that independent events are interrelated

In this revision video we look at some of the cognitive biases that can affect people’s behaviour. ​The existence of such biases calls into question economic models that assume people always act rationally, attempting to maximise their individual self-interest. ​​

Behavioural economics is the topic area we focus on this live revision session for A-Level Economics students.