Which of the following is a characteristic of 'Prospect Theory' developed by Kahneman and Tversky?
A. Only final wealth levels matter
B. People always maximise expected utility with stable preferences
C. Losses and gains are treated symmetrically
D. People evaluate outcomes relative to a reference point and are loss-averse
Answer: Option D
Solution (By JKSSB Mock Tests)
Prospect theory posits that individuals evaluate outcomes as gains or losses relative to a reference point, overweight small probabilities, and exhibit loss aversion (losses loom larger than gains).
Explanation:
A just transition seeks to ensure that the benefits and costs of the transition to a low-carbon economy are shared equitably and that workers and communities affected by the decline of carbon-intensive sectors receive adequate support.
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