Economics - theme 1

How do value judgements influence individuals

• eg. Deciding to not eat meat

How do value judgements influence governments

• US spend more money imprisoning drugs users over rehabilitation

• UK has increased rehabilitation spending

rational decision making

• consumers maximise total utility with all information

• producers maximise profits

• Workers balance welfare

• Governments place interests of people

bounded rationality

• don’t have all information

• Makes a choice which is satisfactory

  • Use rule of thumb

• More vulnerable to framing

availability bias

rely on information first received

Watching news about robberies may think you’ll be more prone to robberies

Social norms

queuing in a shop

heuristics

making decisions based on gut feeling

loss aversion

prefer avoiding loss than winning equivalent gains

Choice overload

too many options makes decisions harder to make

Nudges

alters environment which people make decisions in

Choice architecture

salad bars placed at the start of buffet

restricted choice

limiting choices for healthy options

Mandated choice

legally obligated to have car insurance

framing

• visual framing

  • TV license has red envelope