Behavioural economics

Utility

The happiness of satisfaction that consumer receives from the consumption of one product.

Total utility

Overall satisfaction.

Marginal utility

Additional utility from one additional consumption of one product.

Mu=∆Tu/∆Q

The law of diminishing Mu

The Mu gained from the consumption of one product tends to fall as consumption increases.

Rational consumer choice

Introduce human psychology into the buyer decision working process and consider how factors other than utility maximization.

Biases

The factors that influence individuals in decision making situation and take them away natural judgement.

Heuristics

In buy situation people use mental shortcuts that allow them to make decision in the time frame they are normally faced with.

Rule of thumb

Based on the belief people make quick judgment, and based on what they normally consider to be an expected outcome.

Anchoring bias

Based on past experiences which may strongly influence a decision.