5 Psychology of Debts

Question 1

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How financial constraints influence consumer behavior

Answer 1

-Resource scarcity: considers how financial constraints shift the consumer’s attention to money and change the way they use this scarce resource (Money)
-choice restriction: how financial constraints limit consumption of products and services that consumers need or want (Choices)
-social comparison: role of financial constraints in shifting consumers’
motivations (Others)
-environmental uncertainty: financial constraints shift
the way consumers interact with their environment (Environment)

Question 2

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Stages of consumer´s response to financial constraint

Answer 2

1. Reacting
2. Coping
3. Adapting

Question 3

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financial constraints
from the
perspective of resource scarcity

Answer 3

-new constraints force consumers to shift their attention to money
-making them feel cognitively taxed
-cope with financial constraints by using
resources more efficiently and considering opportunity costs more carefully
-Over time, thoughts of money become chronically top of mind, and this dark cloud may have the silver lining of making financially constrained consumers less susceptible

Question 4

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financial constraints
from the
Choice restriction perspective

Answer 4

-consumers react by becoming more aroused, reflexively increasing
their desire for the restricted option, feeling frustrated, and even becoming more aggressive. -cope with this constraint by savoring ordinary
experiences and finding more creative uses for
products
-Over time, consumers adapt to choice
restrictions by becoming more resourceful and
innovative
-more resilience when encountering new instances of choice restriction

Question 5

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financial constraints
from the
Social Comparison Perspective

Answer 5

-consumers initially react to financial constraints by feeling inferior, reducing their self-esteem
-cope with the unfavorable social comparisons
triggered by financial constraints by seeking
to acquire scarce products and by bolstering their social rank
-Over time, consumers adapt by seeking materialistic possessions and by becoming
more interdependent,

Question 6

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financial constraints
from the
Environmental Uncertainty Perspective

Answer 6

-consumers react by feeling stressed and sensing a lack of control
-cope with this constraint by seeking to re-establish control and boost certainty, including through their purchasing and parenting behaviors.
-Over time, consumers adapt to environmental
uncertainty by becoming more focused on the
present and seeking to maximize immediate opportunities, which is an adaptive strategy in environments
where the future is difficult to predict

Question 7

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Conclusion

Answer 7

• consumers proactively cope with financial constraints
• initial reactions to financial constraints may differ based on a consumer´s long-term exposure to a financial constraint
• consumer resilience
• consumers often successfully cope with and devise adaptive strategies to deal with financial constraints
• financial constraints prompt consumers to develop coping strategies to manage within the constraint
• long term: consumers adapt to the constraint and these adaptions moderate their responses to new constraints

Question 8

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Poverty impedes cognitive function

Answer 8

• poverty itself reduces cognitive capacity
• poverty-related concerns consume mental resources, leaving less for other tasks
• the poor use less preventive health care, fail to adhere to drug regimens, are tardier and less likely to keep appointments, are less productive, less attentive parents, worse managers of their finances
• Solutions: Simple interventions, help filling forms out, planning prompts

Question 9

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Circular economy (CE)

Answer 9

-aims at decoupling value creation from waste generation and
resource use by radically transforming production and consumption systems
-cultural barriers are a significant factor hindering the diffusion of so-called ‘circular’ business models, particularly the lack of
consumer—or user—acceptance
-consumption in the circular economy is anonymous, connected,
political, uncertain, and based on multiple values, not only utility
-circular economy considers consumers to be passive and rational recipients that will follow labels and other production-side signals when making decisi

Question 10

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Butterfly diagram

Answer 10

• circular econonmy is divided into two cycles, a biological cycle and a technical cycle
• 3 principles that the foundation coined as the circular economy principles:
  1. preservation and enhancement of natural capital
  2. the longer circulation of products and materials in both cycles
  3. designing out waste

Question 11

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Circular economy

Answer 11

circular economy = “is an economic system that replaces the “end-of-life” concept with reducing, alternatively reusing, recycling, and recovering materials in production/distribution
and consumption processes
-It operates at the micro level (products, companies, consumers), meso level
(eco-industrial parks), and macro level (city, region, nation, and beyond), with the aim of accomplishing
sustainable development, thus simultaneously creating environmental quality, economic prosperity responsible consumers.”

Question 12

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Circular Economy and Circular Solutions

Answer 12

-five types of circular business models: circular supplies, resource recovery, product life extension, sharing platforms, and product as service