CH15 Alternative views of consumer behaviour

Question 1

What do some economists argue about the picture of homo-economicus offered by neo-classical economics of economic actors?

Answer 1

some economists argue that it is incorrect.
-for example, they dont often buy at the cheapest price and their choices can be manipulated. This view is explored by a branch of economics called behavioural economics.

Question 2

What is the main thing behavioural economists argue?

Answer 2

they main thing they argue is that consumers may not behave rationally.

Question 3

What are the 3 reasons why, according to behavioural economists, consumers may not behave rationally?

Answer 3

1) Consideration of the influence of other people’s behaviour:
-rationality assumes that economic actors act individually in a way which will maximise their own benefits. However, evidence suggests that individuals often do not make free and independent choices. Instead, they make choices which are influenced by social norms.
2) The importance of habitual behaviour:
-habits are extremely important when making decisions. Habits may represent short cuts in decision-making.
3) Consumer weakness at computation:
-consumers are not always willing or able to make comparisons between prices and different goods on offer. Prices and offers are often presented in ways where consumers find it difficult to do the mathematics required for a comparison.