Question

Indicate whether each of the following examples of behavior is consistent with the utility-maximization framework of traditional economics or is better explained by concepts developed by behavioral economists

Answer 1

The examples are given below:

• There are people who pursue a degree in theater rather than science, even though scientific careers are usually much higher-paying.= Consistent with the Predictions of Traditional Economic Models

• Some people care about how much money they make relative to other people rather than their absolute level of income.= Reserved for Behavioral Economics

• Some people would be willing to make a large sacrifice in order to help a loved one.= Consistent with the Predictions of Traditional Economic Models

• Some people treat $75 they earn differently from $75 they receive as a gift.= Reserved for Behavioral Economics

What is meant by Behavioral economics?

Behavioral economics combines elements of economics and psychology to understand how and why people behave the way they do in the real world. It differs from neoclassical economics, which assumes that most people have well-defined preferences and make well-informed, self-interested decisions based on those preferences.

What are behavioral economic strategies?

Behavioural economics aids marketing strategies by understanding how consumer decisions can be influenced. As a result, making small changes to the product, the branding or the choices you offer can massively influence consumer behaviour.

Learn more about behavior:

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