In this video, we're exploring a powerful and exam-relevant concept from behavioural economics — System 1 and System 2 Thinking. These ideas challenge the traditional view that consumers are always rational decision-makers. Instead, the late, great Daniel Kahneman — a Nobel Prize-winning economist — argued that we have two systems of thinking:

🧠 System 1 & System 2 Thinking – Summary:

Human decision-making runs on two tracks:

System 1 is fast, intuitive, and emotional — great for snap judgments, but prone to bias.

System 2 is slow, logical, and effortful — better for careful analysis, but often lazy and switched off.

Coined by Daniel Kahneman, this dual-process theory shows why people don’t always act rationally. It’s a core idea in behavioural economics, explaining everything from anchoring bias to nudges.

In short: We think fast… until we’re forced to think slow.