Rational Behaviour (Quizlet Revision Activity)

Test your understanding of rational behaviour with this ten term quizlet revision activity

Key terms to revise on rational and irrational behaviour

• Adverse selection: When those most likely to buy insurance are also those most likely to use it
• Asymmetric information: Imbalance in information between buyer and seller
• Bounded rationality: When consumers have limited attention, knowledge and ability to understand couple decisions
• Information gaps: Consumers have insufficient knowledge to make an optimal decision
• Irrational behaviour: A decision that goes against or counter to logic
• Marginal private cost: Internal cost to the consumer of purchasing another unit
• Marginal utility: Change in total utility from consuming the next unit
• Maximum utility: When marginal utility is zero
• Moral hazard: When consumers take greater risks because they know they are insured against consequences of actions
• Rationality: Using all information to make optimal choices

This video looks at the concept of rationality - often assumed in economics textbooks to be the model of consumer behaviour but which is now fundamentally challenged by behavioural economic thinking.

Behavioural economics looks for examples of people making decisions in ways which deviate from those predicted by the rational choice model of economics. Here is a short video exploring the difference between bounded rationality and bounded self control.