A government decided to attempt to tackle the over-consumption of demerit goods such as sugary foods. It attempted two policies in two cities: Policy 1: A tax on sugary drinks in supermarkets Policy 2: Moving healthier food to eye level in supermarkets Policy 1 was unsuccessful but Policy 2 was very successful. Which of the following explains these results? Policy 1: PED elastic Policy 2: People are subject to nudges Policy 1: PED inelastic Policy 2: People are subject to the availability heuristic Policy 1: PED elastic © Policy 2: People are subject to a framing bias @ Policy 1: PED inelastic Policy 2: People are subject to nudges The University of California, Berkeley, published a report that showed that individual investors are 50% more likely to sell a winning stock than a loser even though, on average, the stocks these investors sell go on to outperform while those they hold onto underperform. This is an example of what? o Being risk neutral in the loss domain but risk averse in the gain domain , Being risk loving in the gain domain but risk averse in the loss domain o Being risk averse in the gain domain and risk averse in the loss domain Being risk loving in the loss domain but risk averse in the gain domainSystem A is slower, more deliberative, and more logical. System B is faster, more instinctive and emotional. The Nobel Prize winner Daniel Kahneman used these two systems to explain human decision making processes. What terms did he use to describe these two modes of thinking? © System B = System 1; System A = System 2 © System A = System 1; System B = System 2 © System A = System 1; System B = System 0 © System B = System X; System A = System Y The news has recently widely reported a financial stock mark crash. As a result of this report, when asked the likelihood of a financial stock mark crash occurring in the USA, people overestimate the probability. This is an example of which cognitive bias? © Availability bias © Confirmation bias © Optimism bias © Framing biasFirm A sells the generic pharmaceutical drug Ibuprofen for pain relief. Firm B sells the branded pharmaceutical drug Nurofen for pain relief. Despite the two products being homogenous, Firm B finds it can sell its product for three times the price Firm A’s drug, despite the two drugs having the same effect. This is an example of: © Anchoring © Confirmation bias © Framing o Anudge A person watched the news last night, viewing a report on the use of anti-depressants. The next day he was asked to estimate the prevalence of depression in the country. The availability heuristic states that he would: © Underestimate the true level of depression « Not be able to put any estimate on the level of depression o Approximate the true level of depression perfectly @ Overestimate the true level of depressionWhich of the following is a criticism of the research in the field of behavioural economics? The research is based on experiments that: Use predominantly western, educated, rich people in their studies , Use predominantly poor, uneducated ~ men in their studies © Assumes people are boundedly rational © Assumes rational behaviour The use of heuristics can lead to: @ Cognitive biases _ System 2 thinking dominating System 1 thinking © Utility maximising behaviour © Unbounded rationalityThe term ‘homo economicus’ is used to describe: , Infinite ability to make irrational ~ decisions ® Irrational decision making © Finite ability to make rational decisions 8 Infinite ability to make rational decisions