Behavioural Economics Part 1: Rational Choice Theory

According to rational choice theory, what do individuals use to determine the right choice associated with their best self-interest?

• Emotions

• Common sense

• Logical and sensible reasons

• Intuition

What is the assumption of rational consumer choice based on?

• Biases, bounded rationality, bounded self-control, bounded selfishness, and imperfect information

• Utility maximization, perfect information, and consumer rationality

• Availability bias, anchoring and framing, and rule of thumb

• Peer pressure, social conformity, and group preferences

Which bias influences how people process complex information as part of the decision-making process?

• Availability bias

• Anchoring and framing

• Rule of thumb

• Confirmation bias

What does bounded rationality theory argue in behavioural economics?

• People always make the most rational decisions

• Rationality is not restricted by thinking capacity

• Decisions are often based on incomplete information

• People have unlimited access to information

What does bounded selfishness refer to in the context of behavioural economics?

• Doing voluntary work for personal gain

• Donating money to charity

• Helping strangers without expecting anything in return

• Acting only in self-interest and maximizing personal benefit

What is one of the consequences of the availability bias?

• People become poor at estimating probability and risks

• People tend to make rational decisions easily

• People always choose the option with the highest price

• People are more likely to follow social norms

What is the theory of bounded self-control in behavioural economics?

• People make decisions based on complete information

• People have unlimited self-control

• People always make rational choices

• People often let others influence their decisions

What is one of the limitations of the assumptions of rational consumer choice?

• Biases

• Utility maximization

• Bounded selfishness

• Perfect information

What does behavioural economics study in terms of decision-making?

• The power of perfect information in decision-making

• The assumption that individuals make choices in isolation

• The influence of social conformity on decision-making

• Actual economic decision-making with emphasis on rationality

What is the concept of rational consumer choice based on?

• Making decisions based on emotions

• Choosing options without relevant information

• Acting based on peer pressure

• Making sensible choices that align with best interests