Behavioral Economics Concepts and Applications

The video introduces behavioral economics, exploring why people make irrational decisions and how behavior diverges from economic models. It covers the history, key terms, and applications of the field, highlighting its impact on various sectors like healthcare, finance, and public policy. The video concludes with a summary of how behavioral economics blends psychology and economics to enhance decision-making.

What is the primary focus of behavioral economics?

• The study of market trends

• The study of economic policies

• The study of psychological influences on economic decisions

• The study of financial markets

Who is considered one of the early contributors to the field of behavioral economics?

• John Maynard Keynes

• Milton Friedman

• Adam Smith

• Paul Samuelson

What concept did Herbert Simon introduce that challenged the assumption of perfect rationality?

• Loss Aversion

• Bounded Rationality

• Mental Accounting

• Prospect Theory

Which theory explains why people might prefer avoiding losses over acquiring equivalent gains?

• Prospect Theory

• Bounded Self-Interest

• Mental Accounting

• Availability Heuristic

What is the availability heuristic?

• A method of saving money

• A strategy for making investments

• A way to calculate risk

• A tendency to rely on easily recalled information

In which field is behavioral economics used to design programs that encourage healthier choices?

• Finance

• Marketing

• Healthcare

• Education

How do businesses use behavioral economics in marketing?

• To calculate taxes

• To manage employee benefits

• To design new products

• To set prices and offers that seem more appealing

What is one way governments use behavioral economics in public policy?

• To promote international trade

• To increase taxes

• To reduce government spending

• To encourage recycling and safe driving

Which application of behavioral economics involves showing people how much energy they are saving?

• Transportation

• Insurance

• Environment

• Finance

What is the main benefit of understanding behavioral economics according to the summary?

• It helps in predicting stock market trends

• It enhances decision-making and policy responses

• It reduces the need for economic models

• It simplifies economic theories