Asked by Ingrid Depaz on May 17, 2024
Verified
Behavioral economics recognizes that people use System 1 to make decisions more often than they use System 2.Which of the following is an implication of that decision-making process?
A) A majority of decisions are not made according to the neoclassical assumption of rational behavior.
B) Most decisions involve careful calculation of costs and benefits.
C) Even though most decisions are irrational,the neoclassical model still accurately predicts outcomes.
D) System 1 is best at making optimal decisions.
Behavioral Economics
An area within economics that examines how psychological, cognitive, emotional, cultural, and social aspects influence the economic choices made by individuals and institutions.
System 1
A term from psychology, referring to the fast, automatic, and often subconscious way of thinking, as opposed to the slower, more deliberate thought processes of System 2.
System 2
A term often used in behavioral economics, referring to slow, deliberative, and analytical thinking, contrasted with fast, instinctive, and emotional 'System 1' thinking.
- Understand the distinction and application of System 1 and System 2 in decision-making processes.
- Understand the contribution of behavioral economics to explaining phenomena not accounted for by traditional economic models.
Verified Answer
Learning Objectives
- Understand the distinction and application of System 1 and System 2 in decision-making processes.
- Understand the contribution of behavioral economics to explaining phenomena not accounted for by traditional economic models.
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