HL Behavioral Economics and Consumer Choice Vocabulary (Ch 3)

A collection of vocabulary flashcards defining key concepts in consumer choice, rationality, cognitive biases, and choice architecture.

Rational Consumer Choice

The traditional neoclassical assumption that consumers make logical decisions to maximize total utility.

Bounded Rationality

The reality that consumer decisions are limited by cognitive constraints, incomplete information, and time.

Bounded Self-Control

The inability of consumers to stick to optimal long-term choices due to short-term impulse or temptation.

Bounded Selfishness

The human tendency to act out of fairness, altruism, or empathy rather than pure self-interest.

Cognitive Biases

Systematic deviations from rational judgment or logical decision-making.

Rule of Thumb

Simple heuristics or mental shortcuts used by consumers to make quick decisions without full analysis.

Anchoring Bias

Over-relying on the first piece of information encountered when evaluating choices or prices.

Availability Bias

Estimating likelihood or value based on how easily recent or vivid examples come to mind.

Framing

Changing consumer choices simply by changing how information or options are presented.

Choice Architecture

The practice of structuring decision environments to influence consumer selections.

Default Choice

The option automatically implemented unless a consumer takes active action to change it.

Nudge Theory

Subtle interventions in choice environments that guide human behavior without banning options or changing financial costs.