Classical Rationality
Classical economics assumes that consumers always make decisions to maximize this overall satisfaction.
utility
Using a simple shortcut like "a serving of fruit is the size of a fist" to simplify a choice.
What is a rule of thumb?
Settling for a decision that is "good enough" rather than searching for the absolute optimal choice.
bounded rationality
A method designed to persuade consumer decisions without forbidding any options or taking away choice.
nudge theory
Which body organ filters blood in humans?
kidneys
Traditional models assume that the primary objective of every firm is to maximize this.
profit
Buying a $75 pair of jeans because they were originally priced at $100 relies on this bias.
Eating too much junk food, overspending, or procrastinating on work demonstrates this human limit.
bounded self control
The choice option that takes effect if a consumer does not take any active action.
default choice
What is the capital city of Australia?
canberra
The assumption that consumers know all available facts about prices, quality, and options before buying.
perfect information
Presenting a product as "90% fat-free" instead of "10% fat" influences choice through this tactic.
framing
Donating to public charities or performing selfless acts at a personal financial cost proves humans have this limit.
bounded selfishness
Government regulations like speed limits and legal voting ages are examples of this choice architecture.
resricted choice
Who wrote the epic poems The Iliad and The Odyssey?
homer
The classical rule assuming a consumer will always choose 5 slices of pizza over 2 slices.
preferring more over less
Relying heavily on the most recent news or easily recalled events when making decisions.
availability bias
Consumers cannot make true utility-maximizing decisions because they lack access to full market facts, known as this.
imperfect information
Being required by law to state "Yes" or "No" regarding organ donation when renewing a driver's license.
What is mandated choice?
What is the dot over the letter "i" called?
tittle
The 18th-century economist whose foundational assumption of rational self-interest is challenged by behavioral economics.
adam smith
Behavioral economics defines cognitive biases generally as these systematic departures from normal, logical thinking.
What are departures from rational thinking?
Rather than relying purely on theoretical formulas, Behavioral Economics relies heavily on these to study human actions.
experiments
A business objective where a firm takes actions to protect society and the environment alongside earning profit.
corporate social responsibility
What is the name of the hit Netflix series starring Penn Badgley as a stalker/serial killer?
You