INTRODUCTION TO BEHAVIORAL
ECONOMICS 1ST EDITION DAVID JUST TEST
BANK PRACTICE SCRIPT UPDATED 2026
TESTED SOLUTIONS
⫸ What are biases and what are they influenced by? Answer: Biases are
factors that influence individuals in decision-making situations. They are
influenced by heuristics, which is simplifying decision-making by
consumers when they cannot work out the option that will give them the
greatest utility.
⫸ Why heuristics? Answer: It allows consumers to make decisions in
the time frame they are faced with, allowing them to optimize their
utility rather than maximize their utility.
⫸ What is anchoring bias and where does it come from? Answer:
Anchoring bias is a reference point in an individual's mind based on the
first piece of information they experience and it strongly influences a
decision they make. It comes from past experiences.
⫸ What is an example of anchoring bias? Answer: When Apple first
launched the iPad it was reported that the company would set a price of
$999, but the actual launch price was $499. With a $999 'anchored' in
the mind of potential consumers the $499 was a relatively attractive
price.
, ⫸ What is framing bias? Answer: It is the way decisions made by
individuals are affected by the way choices are presented to them.
⫸ What is an example of framing bias? Answer: Consumers faced with
a dessert in a supermarket would choose a product that says '80% fat-
free' rather than '20% fat' because they are attracted by the word 'free'.
⫸ What is availability bias? Answer: It considers how individual
decision-making is affected by information that comes easily into
someone's mind and is based on recent events and how the outcomes of
these events affect our decision-making.
⫸ What is an example of availability bias? Answer: If someone goes to
catch a bus and it is late they will believe the bus service is unreliable
even if the bus service is the most reliable in the area.
⫸ Explain the nature of rationality? Answer: Classical theory assumes
that consumers make decisions in a rational way but behavorial
economics thinks this is too simplistic.
⫸ What is bounded rationality? Answer: Individuals make a decision
that offers them a good enough outcome rather than optimal outcome
because consumers are satisfiers (seek an acceptable outcome).
⫸ Example of bounded rationality? Answer: a consumer in a fast-food
restaurant may not research their choice in detail to work out the choice
ECONOMICS 1ST EDITION DAVID JUST TEST
BANK PRACTICE SCRIPT UPDATED 2026
TESTED SOLUTIONS
⫸ What are biases and what are they influenced by? Answer: Biases are
factors that influence individuals in decision-making situations. They are
influenced by heuristics, which is simplifying decision-making by
consumers when they cannot work out the option that will give them the
greatest utility.
⫸ Why heuristics? Answer: It allows consumers to make decisions in
the time frame they are faced with, allowing them to optimize their
utility rather than maximize their utility.
⫸ What is anchoring bias and where does it come from? Answer:
Anchoring bias is a reference point in an individual's mind based on the
first piece of information they experience and it strongly influences a
decision they make. It comes from past experiences.
⫸ What is an example of anchoring bias? Answer: When Apple first
launched the iPad it was reported that the company would set a price of
$999, but the actual launch price was $499. With a $999 'anchored' in
the mind of potential consumers the $499 was a relatively attractive
price.
, ⫸ What is framing bias? Answer: It is the way decisions made by
individuals are affected by the way choices are presented to them.
⫸ What is an example of framing bias? Answer: Consumers faced with
a dessert in a supermarket would choose a product that says '80% fat-
free' rather than '20% fat' because they are attracted by the word 'free'.
⫸ What is availability bias? Answer: It considers how individual
decision-making is affected by information that comes easily into
someone's mind and is based on recent events and how the outcomes of
these events affect our decision-making.
⫸ What is an example of availability bias? Answer: If someone goes to
catch a bus and it is late they will believe the bus service is unreliable
even if the bus service is the most reliable in the area.
⫸ Explain the nature of rationality? Answer: Classical theory assumes
that consumers make decisions in a rational way but behavorial
economics thinks this is too simplistic.
⫸ What is bounded rationality? Answer: Individuals make a decision
that offers them a good enough outcome rather than optimal outcome
because consumers are satisfiers (seek an acceptable outcome).
⫸ Example of bounded rationality? Answer: a consumer in a fast-food
restaurant may not research their choice in detail to work out the choice
