Loss Aversion (Behavioural Economics)
- Levels: A Level, IB
- Exam boards: AQA, Edexcel, OCR, IB, Eduqas, WJEC
The basic idea behind loss aversion is that people feel losses much more than gains. People do not treat gains and losses in a linear way!
Loss aversion is often seen in financial markets: Some evidence that stock market investors hold their investment positions with paper losses too long and sell their investment holding paper gains too early.
Loss aversion is often appealed to by businesses trying to sell funeral and airline insurance - they have developed pitches to consumers that appeal to the fear of financial loss and specifically the worry that they will not be able to afford to pay for the funeral of a loved one at a time of extreme grief. The pain of losses is greater than the pleasure of a similar gain.
Let's hear about prospect theory and loss aversion from a Nobel prize winner in economics - Professor Robert Shiller.
loss aversion applies in macro terms - countries that undergo recessions see big wellbeing loss, even when growth brings limited benefits. Ppl value stability pic.twitter.com/6eGDNLCLLt
— Rob Macquarie (@RJMacquarie) January 26, 2019
View our full playlist of revision videos on behavioural economics over on the Tutor2u Youtube Channel:
Subscribe to email updates from tutor2u Economics
Join 1000s of fellow Economics teachers and students all getting the tutor2u Economics team's latest resources and support delivered fresh in their inbox every morning.
You can also follow @tutor2uEconomics on Twitter, subscribe to our YouTube channel, or join our popular Facebook Groups.
Job board
Part time Teacher of Business and Economics
St Aidan's Church of England High School, Harrogate, North Yorkshire
- Economics
- Student videos
- Loss Aversion
- Risk averse
- Behavioural Economics
- Richard Thaler
- Daniel Kahneman
Geoff Riley
Geoff Riley FRSA has been teaching Economics for over thirty years. He has over twenty years experience as Head of Economics at leading schools. He writes extensively and is a contributor and presenter on CPD conferences in the UK and overseas.
Related Collections
You might also like
From the Blog
More Student videos
-
Essential A Level Economics: Year 2 (Micro) - Costs of Production
This revision webinar will look at the economics of short and long run costs of production and their significance for different market structures.
-
Teaching Contestable Markets
What are the characteristics of a contestable market? Is a contestable market more or less efficient than other types of market structure? Exactly how contestable is any particular market? This...
Popular Content
-
Edexcel A Level Economics Diagram Practice BookEdexcel A Level Economics Diagram Practice Book
- SKU: 02-4130-30188-01
-
Printed Edition
-
Student personal license
- £7.95
Added to your Shopping Cart!
Edexcel A Level Economics Diagram Practice Book
- SKU: 02-4130-30188-01
-
Printed Edition
- £7.95
-
AQA A Level Economics Diagram Practice BookAQA A Level Economics Diagram Practice Book
- SKU: 02-4130-30187-01
-
Printed Edition
-
Student personal license
- £7.95
Added to your Shopping Cart!
AQA A Level Economics Diagram Practice Book
- SKU: 02-4130-30187-01
-
Printed Edition
- £7.95
Teaching Vacancies
-
Exam markers for GCSE and A-level Economics – Apply now 9 days left to apply
AQA, Home
-
Student Revision Workshops Contributor
tutor2u, Home based
- Browse all jobs ›
Advertise your vacancies with tutor2u
Much cheaper & more effective than TES or the Guardian. Reach the audience you really want to apply for your teaching vacancy by posting directly to our website and related social media audiences.