Micro 2.2

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Created by: neve.whinn
Created on: 10-03-20 18:22

What does behavioural economics recognise?

Consumers are unlikely to always act rationally in the face of every decision they make.

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Why are consumers unlikely to always act rationally?

Consumers face imperfect information.

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What does imperfect information mean with consumers?

They rarely possess all the information required to make fully informed decisions.

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In what ways can imperfect information be presented to consumers?

Economic agents can be faced with too little/much information, or find themselves knowing more/less information than other parties to a transaction. Information can be presented in such a way as to exclude some people and be meaningful to others.

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What stops consumers from acquiring information?

There can be costs involved.

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What is asymmetric information?

A form of imperfect information when one party (usually the seller) has more/superior information than another party (usually the buyer).

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What can asymmetric information lead to?

An imbalance of power, where one party can exploit the other, resulting in market failure.

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What does uncertainty lead to?

A lack of trust between agents, which may mean that a mutually beneficial exchange does not occur.

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Other cards in this set

Card 2

Front

Why are consumers unlikely to always act rationally?

Back

Consumers face imperfect information.

Card 3

Front

What does imperfect information mean with consumers?

Back

Card 4

Front

In what ways can imperfect information be presented to consumers?

Back

Card 5

Front

What stops consumers from acquiring information?

Back

View more cards

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Micro 2.2