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Terms in this set (28)
We do many things on autopilot. For example most people eat in a trance. Thus if we want to reduce our eating, techniques such as active attention and using small plate sizes help. Example: Moviegoers were given a free bucket of popcorn. Some were given a big bucket, some a smaller one. Even though the popcorn was stale people with the big bucket consumed on average 53% more.
The perceived value of something can be steered by an initial, sometimes irrelevant activity.
Example: With charitable donations, people give more if the options range from $100 up to $5,000 than if the options range from $50 up to $150.
Example of this bias: 90% of US drivers think they are above average drivers. 94% of US professors at large universities believe they are better teachers than average.
Our over-reliance on stereotypes (based on past experience) gets us into trouble. Furthermore, we try to create (false) meaning out of randomness.
Example: Streak shooting in basketball is a well known concept, when players have a 'hot-hand' and thus score more points if they have shot successfully the last time. However, statistical studies have shown that hot hand is a myth.
determine the likelihood of risks in our mind by how easily we can think of examples of the risk.
Example: School leaders in Los Angeles can think of lots of examples of school shootings, so they do lots of school shooter drills and no earthquake preparation drills, even though it much more statistically likely there school will have an earthquake than a shooter.
The contextualizing or wording of an issue can dramatically influence decision-making:
Example: Doctor says, "Of 100 patients who have this operation, 90 are alive five years later" vs. "of 100 patients who have this operation, 10 are dead five years later". Even though the odds are exactly the same, the numbers agreeing to the operation are radically different.
We are easily influenced by what others say and do (especially by those within the circle we wish to be associated with).
Example: The academic achievements of American students correlate closely with their roommates.
Often seemingly irrelevant information can influence people's thinking and behavior.
Example: The mere scent of an all-purpose cleaner encourages people to clean away their dishes after a meal.
Example: Asking people in advance of an election if they are going to vote increases the likelihood of voting by up to 25%.
According to the article "The 11 Ways That Consumers Are Hopeless at Math"
you usually shouldn't by a warranty for a new product your purchase
As the price of one product increases, the demand for another good shifts to the right (increases). These goods are:
Shift of the supply line to the left can be caused by:
taxes on a certain company or anything that increases the price of labor
Peanut Butter and Jelly are examples of:
A change in the tastes of consumers.
An increase in the total # of buyers.
An increase in the price of hamburgers.
A decrease in the price of buns
can all cause the demand line for hot-dogs to shift right (increase the demands of hot dogs)
What does it mean if a good or service is said to have 'elastic' demand?
Small changes in price result in large changes in quantity demanded.
A shortage occurs when:
price is set below the equilibrium
Cheaper fertilizer prices enable farmers in California to grow lettuce cheaper. What will this cause in the lettuce market?
Increase in supply, supply curve shifts to the right. Because now there will be more lettuce supplied.
Heroin is an example
Inelastic good, because heroin is highly addicting and no matter what the price is, consumers will forever find a way to purchase it. I does nothing to the demand
The way a government adjust its spending levels and tax rates to monitor and influence a nation's economy.
Expansionary Fiscal Policy
If the government has a recession gap, the government can increase government spending, cut taxes or do some of both
Contractionary fiscal policy
When the government faces a inflationary gap, they can raise taxes, cut spending or do a little bit of both/
When the government spends more money than what they bring every year
The sum of all the deficit spending equals
Demand Pull Inflation
When the economy begins to grow rapidly and it starts to "overheat"
When there is a rise in the price of raw materials, shocks.
Who is the federal reserve bank or the "fed"
The fed is the "mother of all banks" it oversees and regulates the nation's commercial banks. They use monetary supply
What does monetary policy do?
Monetary supply is used to either speed-up the economy or to slow it-down by using three tools.
three different tools
Open Market Operations
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