Judgments Based on the Availability Heuristic Are Biased Because Consumers

question 76

Multiple Choice

Judgments based on the availability heuristic are biased because consumers tend to ignore:

• A) representativeness.
• B) hierarchies of effect.
• C) misunderstandings.
• D) base-rate information.
• E) profound thinking.

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Definitions:

Utility Maximization

The economic principle stating individuals aim to achieve the highest satisfaction possible from consumption given their income and prices of goods.

Diminishing Marginal Utility

A principle stating that as more of a good or service is consumed, the additional satisfaction from consuming one more unit decreases.

Income Effect

The impact of income changes on the demand for goods or services by an individual or within the economy.

Substitution Effect

Describes how consumers react to a change in the price of a good by substituting it with another good that is relatively cheaper.