Behavioral Economics Combining Psychology & Economics

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  • Behavioral EconomicsCombining Psychology & Economics

  • Rational Behavior?Traditional economics is based on the assumption that people make rational decisions where the MB MC

  • Behavioral Economics

    Study of the social, cognitive & emotional factors which influence economic decisions making. Uses psychology to predict & test human behavior

  • Irrational Behavior?

  • Should Govt nudge people?Econs vs. HumansAreas to nudge people


  • System 1 vs. System 2 Decision Making

  • Reading: The Truth about Relativity

    1) World as it really is?

  • Ted Video (17 minutes)

  • Ted Video Recap

    Cognitive Physical Limitations vs. Limitations

  • Behavioral Economics Recap

    We cant compute the value of something alone

    We make decisions by comparing optionsWe need context => everything is relativeOur decisions change by what we compare

    We avoid hard comparisons=> we seek things that are easy to compare

    4) We admit physical limitations but not cognitive limitations

    5) Irrational behavior is predictable It occurs over & over again => we are robotic

  • Got Awareness?

  • AP Econ Course Review

  • Always someplace else?

  • Is College Worth It?