Aspects of behavioural economic theory

People cannot always make perfectly rational decisions. Bounded rationality means limited information and brainpower res

Individual economic decision making

Aspects of behavioural economic theory

People do not always make perfectly logical decisions. Instead, mental shortcuts and outside influences push their choic

Individual economic decision making

Aspects of behavioural economic theory

Sometimes people make decisions that benefit others, even at a cost to themselves. They also care whether outcomes feel

Individual economic decision making

Aspects of behavioural economic theory

Behavioural economics challenges the traditional assumption that people always make fully rational decisions, arguing in

Individual economic decision making

Behavioural economics and economic policy

Choice architecture means deliberately designing the environment where people make decisions. Framing means presenting t

Individual economic decision making

Behavioural economics and economic policy

A nudge is a subtle change to the environment around a decision that steers people toward a better choice. It never bans

Individual economic decision making

Behavioural economics and economic policy

Governments can shape decisions by setting what happens automatically (default choice), limiting the available options (

Individual economic decision making

Behavioural economics and economic policy

Because people don't always make fully rational decisions, governments can use insights from behavioural economics — the

Individual economic decision making

Consumer behaviour

Economists assume consumers weigh up costs and benefits before every decision. They respond to incentives — rewards or p

Individual economic decision making

Consumer behaviour

Utility means the satisfaction a consumer gets from a good or service. Each extra unit consumed adds less satisfaction t

Individual economic decision making

Consumer behaviour

Consumers maximise utility by spending their money so that each purchase gives them the greatest possible satisfaction.

Individual economic decision making

Consumer behaviour

Rational consumers decide whether to do a little more or a little less of something. They compare the extra benefit of o

Individual economic decision making

Consumer behaviour

Traditional economics assumes consumers are rational — meaning they weigh up costs and benefits and make decisions that

Individual economic decision making

Imperfect information

Good decisions require accurate information. When people lack full information, they make choices that leave them worse

Individual economic decision making

Imperfect information

Asymmetric information exists when one person in a deal knows more than the other. This knowledge gap can push markets t

Individual economic decision making

Imperfect information

Good decisions depend on good information, but in reality people rarely have access to the full picture — this is known

Individual economic decision making