Question

How does behavioral economics play a role in our lives and in the economy? Give 3 examples (different for each student) on economic "behavior" to support your positions and the works cited or for those transferring to Walsh, APA.

Answer 1

Some applications of behavioral economics in everyday life

How we tend to pay cash is littered with uncountable factors: however we were raised, levels of education, however others around us pay their cash. One theory derived from behavioral economics is that the notion of “mental accounting;” a method the Wall Street Journal labels because the approach in which “the human brain, consciously or otherwise, labels and prioritizes cash otherwise depending on wherever it comes from.” In other words, as shoppers, we tend to categorise the items we should spend cash on. However, irrational behavior usually kicks in after we are creating buying choices. The supply of cash spent usually creates dissociation from the truth of paying it. Tax returns, bonuses or inheritance may well be spent a lot of frivolously than a typical check as a results of ‘mental accounting.’ Finding associate degree everyday item on sale or dearer may additionally lead us to pay a lot of or less in alternative areas due to the perceived savings or loss. All of that, of course, contributes negatively to our savings rate.

Other applications of activity economics embrace design and policy diversifications. Researchers Saugato Datta and Sendhil Mullainathan have written a dissertation on the importance of understanding the gaps left by a lot of ancient views of economic and psychological feature behavior. the middle for world Development says of the study, “Once the matter and unjust bottlenecks are diagnosed, associate degree intervention to beat these limitations is designed.” Studies like this could facilitate dislodge structural problems that act public policy and prevention ways. As a lot of and more data and analysis is completed, the findings of activity economics may influence much more in our daily lives.