shows how much of a good or service the consumer plans to demand at different possible prices
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Law of Demand
as a good's price falls, more is demanded
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Extension of demand
an adjustment or movement down a demand curve following a fall in the good's price
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Contraction of Demand
an adjustment or movement up a demand curve following an increase in the good's price
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Condition of demand
a determinant of demand, other than the good's own price, that fixes the position of the demand curve. A change in one or more of the conditions of demand leads to a shift of demand.
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Rational Behaviour
trying to make decisions in pursuit of self-interest, which will maximize the satisfaction gained from the goods and services consumed
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Utility
satisfaction or economic welfare an individual gains from consuming a good or service
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Marginal utility
the additional satisfaction gained from consuming one extra unit of a good
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Hypothesis of diminishing marginal utility
as a person increases consumption of a good, there is a decline in the marginal utility derived from consuming each additional unit of the good
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Asymmetric information
when one pary to a market transaction has less information relevant to the exchange than the other
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Behavioural economics
a method of economic analysis that applies psychological insights into human behaviour to explain how individuals make choices and decisions
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Bounded rationality
when making decisions, an individual's rationality is limited by the information they have, the limitations of their minds, and limited amount of time available in which to make decisions
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Bounded self-control
limited self-control in which individuals lack the self-control to act in what they see as their self-interest
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Cognitive bias
a mistake in reasoning or in some other mental thought process occurring as a result of, for example, holding onto one's preferences and beliefs, regardless of contrary information
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Availability bias
occurs when individuals place too much weight on the probability of an event happening because they can recall vivid examples of similar events
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Anchoring
a cognitive bias describing the human tendency when making decisions to rely too heavily on the first piece of information offered. Individuals use an initial piece of information when making subsequent judgements
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Social norms
forms or patterns of behaviour considered acceptable by a society or group within that society
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Economic sanctions
restrictions imposed by regulations and/or laws that restrict an individual's freedom to behave in certain ways.
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Nudges
factors which encourage people to think and act in particular ways. Nudges try to shift group and individual behaviour in ways which comply with desirable social norms
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Altruism
concern for the welfare of others
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Choice architecture
a framework setting out different ways in which choices can be presented to consumers, and the impact of that presentation on consumer decision making
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Default choice
an option that is selected automatically unless an alternative is specified
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Framing
how something is presented influences the choices people make
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Mandated/Required choice
people are required by law to make a decision
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Restricted choice
offering people a limited number of options so that they are not overwhelmed by the complexity of the situation. If there are too many choices, people may make a poorly thought-out decision or not make any decision.
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Shoves
instruct people to behave in certain ways, often by their responding to financial incentives and disincentives that reward or punish different decisions
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Other cards in this set
Card 2
Front
as a good's price falls, more is demanded
Back
Law of Demand
Card 3
Front
an adjustment or movement down a demand curve following a fall in the good's price
Back
Card 4
Front
an adjustment or movement up a demand curve following an increase in the good's price
Back
Card 5
Front
a determinant of demand, other than the good's own price, that fixes the position of the demand curve. A change in one or more of the conditions of demand leads to a shift of demand.
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