Lecture on Neo Classical Economics and Behavioral Influences

Vocabulary flashcards covering the core assumptions of neoclassical economics and various behavioral biases that influence consumer decision-making.

Neo Classical Economists (Consumer Assumption)

Assume that consumers will maximize utility.

Neo Classical Economists (Firm Assumption)

Assume that firms will maximize profit.

Profit Formula

$$Profit = Total Revenue - Total Cost$$

Herd behaviour

The influence of other people's behaviour by following social norms.

Habitual Behaviour

Unconscious behaviour that leads a person to overlook better alternatives and lose out on extra utility.

Status Quo Bias

Also known as Current State Bias.

Weakness at Computation

When individuals fail to maximize utility because they miscalculate, leading to bad choices.