Behavioral Economics

Unlike traditional economics, behavioral economics believes that…

• People do not always behave in a rational way when making economic decisions

• People will always update their viewpoints based on new information

• There is no way to predict how people will make economic decisions

• People behave in a rational way when making economic decisions

The pain of losing a $20 bill is felt more than the joy of finding it.

This is a result of...

• Loss aversion

• Overconfidence

• Sunk cost

• Endowment effect

Putting more value on an object you own for more than its actually worth is an example of...

• Overconfidence

• Endowment effect

• Confirmation bias

• The Fear of Missing Out (FOMO)

A website tells you, "Only one left!" while shopping online. Which loss aversion strategy is this website using?

• Coupons

• Buy now, get free shipping

• Free trials and samples

• Scarcity and urgency

How do "limited-time offers" influence consumer behavior?

• By making consumers feel they have ample time to decide

• By creating a sense of urgency to make a purchase

• By reducing the perceived value of the product

• By providing detailed comparisons with competitors' products

What is the definition of endowment effect?

• The tendency to put more value on things you already own

• The tendency to feel anxiety/fear that an exciting event may be happening elsewhere

• A subconscious error in thinking that leads to irrational decision making

• The tendency to search for information that supports our preconceptions

What is the definition of loss aversion?

• The tendency to put more value on things you already own

• The tendency to search for information that supports our preconceptions

• The tendency to feel anxiety/fear that an exciting event may be happening elsewhere

• The tendency to regard losses as considerably more important than gains of comparable magnitude

What is the sunk cost fallacy?

• The tendency to make decisions about a current situation based on what resources you have already invested in the situation

• The tendency to feel anxiety/fear that an exciting event may be happening elsewhere

• The tendency to search for information that supports our preconceptions

• The tendency to put more value on things you already own

What is a method of economic analysis that applies psychological insights into human behavior to explain economic decision-making

• Behavioral Economics

• Classical Economics

Behavioral economics is …

• The study of how economies around the world interact with each other

• The study of how irrational factors affect individual’s economic decisions

• The study of how investors choose which stocks to buy and sell

• The study of how rational people make economic decision