Expectations

Definition

Expectations refer to what individuals or firms anticipate will happen in the future regarding prices, incomes, or other economic factors. These expectations influence their current decisions and behavior.

Related terms

Rational Expectations: Rational expectations theory assumes that individuals make predictions about the future using all available information and past experiences.

Adaptive Expectations: Adaptive expectations theory suggests that individuals base their predictions of future events on past trends or experiences.

Anchoring Bias: Anchoring bias is a cognitive bias where individuals rely too heavily on initial information when making judgments or decisions. It can affect how people form their expectations in economic situations.