Question

9. Behavioral economics Indicate whether each of the following examples of behavior is consistent with the way the traditional economic framework suggests people should act, or if it is reserved for behavioral economists to examine. Reserved for Behavioral Economics Consistent with the Predictions of Traditional Economic Models Example Some people would turn down a new, higher-paying job if it meant spending less time with their family. Some people treat $85 they earn differently from $85 they win in a random drawing. Some people sacrifice disposable income to help their children pay for college. Some people would be willing to pay money to lower the incomes of others.

Answer 1

Example 1: Consistent with the predictions of traditional economics models

This makes sense because utility function of traditional economic framework agent could be consisting of two parameters - income as well as time spent with family

Example 2: Reserved for Behavioral Economics

A traditional economic framework agent would have treated the same amount of money likely and attach same values to them.

Example 3: Consistent with the predictions of traditional economics models

This is an example of opportunity cost which is central to traditional economics framework.

Example 4: Reserved for Behavioral Economics

Giving up your own money to lower the income of others is not classified in the domain of traditional Economics.