The importance of altruism and perceptions of fairness
Sometimes people make decisions that benefit others, even at a cost to themselves. They also care whether outcomes feel fair — and this shapes their economic choices.
Real World
In ultimatum game experiments run at universities worldwide, participants consistently reject low offers (e.g. a 20p share of £1) even though accepting any amount is 'rational' — demonstrating that perceptions of fairness override self-interest.
Exam Focus
When evaluating altruism, note it challenges the rational self-interest assumption — this earns AO3 marks if explicitly linked to standard theory.
Price Elasticity of Demand
PED = % change in quantity demanded ÷ % change in price
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