Behavioural Economics

Question 1

Premack’s Differential Probability Principle:
Less desirable activity =
More desirable activity =

We are more likely to do a less desirable activity if we know that a more….
HP behaviours will reinforce…

If a HP behaviour is made contingent on a LP behaviour, then the LP behaviour is…
Opportunity to perform HP after LP will result in…

e.g., reward a child with play after an hour of study
baseline - unconstrained access to tv watching and reading (tv watching = HP)
1hr TV access only after 1hr reading - constrained access to tv only (equal hours engaged in activity)

Answer 1

lower probability (LP)
higher probability (HP) 

desirable activity will follow it
LP ones

more likely to happen

reinforcement of LP

Question 2

Microeconomics:
measures effect of price on…
A way to quantify motivation to…

Answer 2

consumption of a commodity

receive a reinforcer, called demand

Question 3

Demand is
The amount of a commodity that will be…
The price that will be paid in order to…

Answer 3

consumed at a given price

maintain a given level of consumption

Question 4

Demand for a commodity can be assessed by…
As price increases…
X axis –
Y axis –

Answer 4

plotting total consumption against a range of prices
demand decreases
price
amount purchased/consumed

Question 5

Properties of a demand curve show…
Height –
Slope –

At a low price have…
The curve at the top is…
When steep…

Answer 5

different dimensions to our motivation to obtain a commodity
how much is consumed at a given price
how sensitive consumption is across price changes (does the reinforcer stay reinforcing with increase in price?)

a very high demand (maximum consumption)
shallow (not much drop in consumption with increasing price)
large drop in consumption with increase in price

Question 6

Slide 12

Answer 6

Slide 12

Question 7

The degree to which price increases influence consumption =

Different types:

Answer 7

sensitivity to price
Inelastic
Elastic
Mixed

Question 8

Inelastic demand: demand for a product shows…
Examples:

Red line (straight line) - unit elasticity (increase in price by one unit, consumption decreases by one unit)
Black curve (shallow) is demand curve for inelastic demand...

Answer 8

proportionally LESS change as the price increases
Water, Food, Shelter (rent), Transport

increase the price by one unit but the demand decreases by less than one unit

Question 9

Elastic demand: demand for a product shows…
Examples:
Increase price by one unit, the demand (consumptions)…

Answer 9

proportionally MORE change as the price increases
Chocolate, Coke, Big Screen TV’s, Overseas travel, Movies
decreases by more than one unit – steep line

Question 10

Mixed demand:
The price at which the demand curve changes from inelastic to elastic is called…
P-max is the price (x-axis) where…

Answer 10

a combination of inelastic and elastic demand is typical
the P-max
the demand changes from inelastic to elastic

Question 11

In operant experiments subjects make responses
Number of responses =

A demand curve is produced by examining how many reinforcers are consumed at…
X axis -
Y axis -

Produce demand curves based on…
Progressive Ratio -

Answer 11

price the subject is willing to pay

increasing FR response requirements (Progressive Ratio)
reinforcers obtained in a session
Price per reinforcement (FR response requirement)

increasing the FR schedules, how many responses individuals make

how many reinforcers are consumed at increasing FR response requirements

Question 12

A useful way to compare demand functions is to examine the FR value/unit price at which…
P-max also corresponds to the peak or the maximum…

Answer 12

inelastic demand changes to elastic = P-max

number of responses that will be made

Question 13

Slide 20 and 21

Answer 13

Slide 20 and 21

Question 14

How can we use P-max?
e.g., compare abuse potential of different drugs
the higher the P-max, the higher the price…

Answer 14

they are willing to pay

Question 15

Closed economy: There is only one source…
Open economy: There are other sources…

Closed economy – inelastic demand
Live in country with no social security system, only way to secure income is work. People work a lot

Open economy – elastic demand
In NZ, several ways of getting income, can have a job or apply for benefit to secure income

Answer 15

of the commodity and it is only obtained by paying/working to obtain that commodity
of that resource available

Question 16

Open vs. Closed economy for food:
Open - fed after the session
Closed - no post session feeding
Under an open economy, demand is likely to be….

Answer 16

elastic as price increases (since you have other options)

Question 17

Substitutable vs. Complementary goods
Substitute: the more you consume of one…
Examples:
Access to one decreases…

Complement: the more you consume of one…
Examples:
Access to one increases…

Answer 17

the less you consume of the other
Butter/margarine, Patches/Cigarettes, Methadone/Heroin
demand for the other

the more you consume of the other
Marijuana/munchies, PC/Monitor, Toothpaste/toothbrush
demand for the other

Question 18

Demand for petrol decreases if cheaper forms of public transport are made available
Demand for petrol increases if free parking is made available

Answer 18

= substitutable relationship

= complementary relationship

Question 19

Slide 25

Answer 19

Slide 25

Question 20

Many operant experiments only provide…
Applied value in assessing the effect of providing appropriate substitutes on demand

How can substitutes affect demand curves?

Because only provide one reinforcer…
Demand curves gets more elastic for the initial reinforcer because…

Answer 20

one reinforcer

make them more elastic, reduce P-max

substitutability is redundant
there is now a substitute

Question 21

How can substitutes be applied?
e.g., nicotine-containing and de-nicotinised
reduces P-max for…

Increasing the cost of smoking will only see a….

Increase in price and provide a substitute
The substitute would make the demand for the initial reinforcer…

Answer 21

nicotine-containing

reduction in demand if we can get to that elastic part (P-max)

more elastic sooner

Question 22

Animal Welfare:
Can’t directly communicate
Limited basic physiological measures
Providing free access means:
- Knowing what is needed already
- Consuming a lot at a low price is a poor indicator of actual need (bread vs chocolate example)
- Unlimited access may ultimately be harmful

Answer 22

…

Question 23

Animal Welfare:

Preference measures using a Y-maze or concurrent schedule in an operant chamber

Answer 23

Doesn’t tell us how much something is needed, only whether something is liked more than something else

Question 24

Animal Welfare:
Behavioural economic approach
If demand is inelastic... 
If demand is elastic... 
Can use food as a baseline, so other commodities’ demand curves can be compared to those...

Answer 24

then it is a need and not having it will compromise welfare
then it is a luxury and not having it will not affect welfare
of food to determine if they are essential to welfare

Question 25

Animal Welfare:
Environmental requirements of pigs
Could respond to earn contact with another pig, food or opening a door to a larger space
Food > contact > door opening
Social contact elasticity similar to food – essential for welfare

Answer 25

…

Question 26

Rats have greater demand for access to other rats…

Answer 26

vs. other things