Question 1
Which one of the following is most likely to be associated with behavioural economic theory?
Answer: B.
Choice A is incorrect as it describes the "Rational Economic Man" model (Homo Economicus), which behavioural economics seeks to criticise. Choices C and D are incorrect because they focus on standard neoclassical concepts; price mechanism equilibrium and profit-maximising firms are foundational pillars of traditional economic models, not the departures from rationality explored by behavioural economists. Understanding this shift from perfect rationality to "bounded rationality" is key to mastering this topic.
Question 2
Following flooding, described by the Environment Agency as a ‘once in a century event’, there is a sharp increase in the number of residents of a large town who buy additional flood insurance. Which one of these combinations of biases in decision making are the residents most likely to have experienced?
Answer: B.
Other options are incorrect. Anchoring bias involves relying too heavily on an initial piece of information, while framing bias refers to how choices are presented. Neither specifically explains the reaction to a recent, high-profile event like a flood. Rules of thumb are simple mental shortcuts, but they do not capture the social aspect of this behaviour.
What this practice covers
Real past-paper questions, the answer key from the mark scheme, and the explanation that goes with it. Each one is marked the moment you pick, the correct option is shown whether or not you found it, and the full explanation opens either way. No account needed to answer them.
These questions are drawn from past AQA A-Level papers. You answer, you find out immediately whether you were right, and you get the reasoning for the correct option and for each distractor. Wrong answers go to a mistakes locker so you can come back to exactly those.
Practice is free. You need an account only so your progress and your mistakes are still there next time.
What examiners see students get wrong here
These are the errors that cost marks on individual economic decision making, taken from our own topic notes. Read them before you practise and you will recognise the traps in the questions.
- Saying rationality means people are "always right", it means consistent, utility-maximising choice given their information.
- Confusing imperfect information (nobody knows) with asymmetric information (one side knows more).
- Listing behavioural biases without connecting them to a policy or a market outcome.
- Treating nudges as costless and always effective; they have limits and raise paternalism objections.
- Forgetting diminishing marginal utility as the explanation for the downward-sloping demand curve.
- Saying choice architecture is optional; it is unavoidable, which is a strong evaluation point.
Revise it first
If any of the above is unfamiliar, work through the notes before practising: Individual Economic Decision Making revision notes.