Which statement is correct, in relation to behavioural economics?

Question

BlackTom AI · Accepted Answer

Behavioural economics rejects the notion that people are purely rational and instead incorporates psychological, social and emotional drivers of decision-making.

1) Relevant knowledge points and concepts
- Bounded rationality: people have limited attention, information, and computational ability, so they use heuristics (shortcuts). 
- Cognitive biases: systematic deviations from rational judgment (e.g., loss aversion, present bias, anchoring).
- Social preferences and emotions: choices are influenced by social norms, identity, fairness, and feelings.
- Nudges and choice architecture: small changes in how choices are presented that steer behaviour without forbidding options or significantly changing economic incentives.

2) Step-by-step reasoning
- Option b states behavioural economics assumes people are rational and weigh costs/benefits accurately — that is the classical/neoclassical economics assumption, so b is incorrect.
- Option a describes behavioural nudges as imposing financial penalties or rewards. In practice, nudges typically alter presentation, defaults, framing, or timing rather than relying on explicit fines or payments; penalties/rewards are direct incentives, not nudges. So a is incorrect.
- Option d claims behavioural economics is only used by firms to increase sales. This is false because governments, non-profits, and public policy designers widely use behavioural insights (e.g., increasing organ donation via default opt-in, improving savings via automatic enrollment). So d is incorrect.
- Option c states behavioural economics theories are based on the assumption that humans are motivated by psychological, social and emotional factors — this matches the core definition and literature.

3) Calculations
- None required.

4) Why the correct answer is correct
- Behavioural economics explicitly integrates psychological and social elements into models of decision-making; key research by Kahneman & Tversky, Thaler, and others documents how these factors systematically influence choices.

5) Why other options are incorrect (brief)
- a: Mischaracterises nudges as financial penalties/rewards (those are incentives, not nudges).
- b: Describes classical rational-agent assumption, not behavioural economics.
- d: Overly narrow — behavioural insights are used by governments, NGOs and firms.

6) Conclusion
- Therefore the correct choice is c. This matches the provided answer: "c. Behavioural economics theories are based around the assumption that human beings are motivated by psychological, social and emotional factors."

Which statement is correct, in relation to behavioural economics?Single choice

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