Tag: consumption

Behavioural economics looks at the way in which people behave when making economic decisions about spending. It looks essentially and what people buy and why they buy it. Research in behavioural economics has started to question some of the traditional economic assumptions of rationality and argues that habits and other psychological factors may be more important than conventionally assumed.

Why we buy what we buy Guardian (20/5/08)

Questions

1. Explain what is meant by ‘behavioural economics’.
2. Evaluate the principal factors that people take into account when choosing to buy a consumer good.
3. “….. average people are all far more irrational and more human than economists allow”. Discuss the extent to which this might be true.

According to most conventional measures, income inequality in the developed world has been rising. This trend has been argued to be particularly prevalent in the UK and USA, but the article below from The Economist argues that conventional measures may be mis-representing the differences between the better off and the less well off. Instead of looking at income inequality, it looks at consumption inequality.

The new (improved) Gilded age The Economist (19/12/07)

Questions

1. Define the terms (a) income inequality and (b) consumption inequality.
2. Assess the extent to which income represents a good measure of economic wellbeing.
3. Discuss two policies that could be used to reduce (a) income inequality and (b) consumption inequality.