BEHAVIOURAL

ECONOMICS
Izora Hazri
 What is behavioural
economics?
It is the study of how individuals make decisions that
oppose the traditional economic theory, making them
have "irrational" behaviour.
Rational Behaviour
WHAT IS IT?
1. Maximise their own utility
(satisfaction)
2. Cost and benefit analysis
3. They have access to all info
needed at low or zero cost
4. Preferences and attitude to risk
are consistent (transitive)
5. See alternatives
6. It is more based on logical
thinking
Rational Decision
example
COMPARISON

You're buying a new laptop.

You compare the prices
and features of all sorts of
different models. Long term
effect?
Irrational Behaviour
WHAT IS IT?

1. Make decisions with

incomplete info
2. Skip weighing pros and cons
3. Lack of self-control
4. Following the crowd
5. Go for what's available
6. More influenced on emotional
feeling
Irrational Decision
example
IMPULSE BUYING

You're at a grocery store to

buy only 1 loaf of bread, but
you end up leaving with 2
big bags of groceries.
Long-term effect?
Thank you!
Izora Hazri