Individual Economic Decision Making | AQA A-Level Economics (7136)
Individual Economic Decision Making
- 70 questions
- 4 subtopics
- Paper 1: Markets and market failure, and available on Paper 3
- Paper 1 and Paper 3
Individual economic decision making is examined on Papers 1 and 3.
It sets the rational consumer of traditional theory against the evidence that people use shortcuts and act on more than self-interest, and asks what that means for policy.
Sample questions from Individual Economic Decision Making
Answer each one closed book first, then open the answer.
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Consumer behaviour and utility
How does diminishing marginal utility explain the downward slope of a demand curve?
Show the answer
Consumers are only willing to pay less for additional units because each successive unit yields progressively smaller increases in satisfaction. -
Consumer behaviour and utility
What might happen if a consumer lacks accurate information about product quality?
Show the answer
They may make suboptimal choices that do not maximise their utility. -
Imperfect information
Explain why imperfect information is considered a potential source of market failure.
Show the answer
It prevents the efficient allocation of resources that would occur under perfect information, leading to misallocation and market failure. -
Imperfect information
How might the government be affected by imperfect information?
Show the answer
The government may lack complete information about market conditions or the effects of policies, leading to poorly designed interventions. -
Aspects of behavioural economic theory
Why might using heuristics lead to poor economic decisions?
Show the answer
Because while they simplify complex decisions, they can produce systematic biases that result in choices that do not maximise utility. -
Aspects of behavioural economic theory
What is altruism in the context of behavioural economics?
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Individuals making decisions that benefit others at a cost to themselves, contradicting the assumption of pure self-interest. -
Behavioural economics and economic policy
Define restricted choice as a policy tool.
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Limiting the range of options available to decision-makers to simplify decisions or guide behaviour toward preferred outcomes. -
Behavioural economics and economic policy
Why might traditional incentive-based policies be less effective in some contexts according to behavioural insights?
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Because individuals do not always act as rational utility maximisers; cognitive biases and bounded rationality mean they may not respond to incentives as standard economic theory predicts.
The 4 subtopics
One subtopic is one session. Work down the list.
| Subtopic | What it covers | Questions |
|---|---|---|
| Consumer behaviour and utility | Rational decision making, utility maximisation, the budget constraint, and marginal analysis. | 24 |
| Imperfect information | What imperfect and asymmetric information are, and why they stop consumers and producers choosing well. | 10 |
| Aspects of behavioural economic theory | Bounded rationality, heuristics, anchoring and availability bias, altruism and perceptions of fairness. | 19 |
| Behavioural economics and economic policy | Choice architecture, nudges, default options and mandated choice, and where they work. | 17 |
How the guide is worked
Answering a question from memory stores it far better than reading the answer again. The guide runs that as a fixed procedure on one subtopic at a time, about twenty minutes a session.
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Step 1 · Closed book
Cover the answers. Work through one subtopic and write down what you can. Leave blanks where you have nothing.
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Step 2 · Open book
Go back to the top. Read each printed answer and write it out in full, including the ones you had right.
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Step 3 · Closed book again
Same questions, same order, from memory. The gap between pass one and pass three is the session result.
Read the full method, the return schedule and the research behind it.
Nearby topics
AQA A-Level Economics Active Recall Guide
Every topic, not just this one. 2,344 questions with their answers.