Question

Which of the following is an example of where Behavioral Economics is being used?

1. To discourage texting, a huge tax is placed on its use

2. To encourage people to buy more hamburgers, a firm lowers its price

3. To encourage people to buy an item, you don't just show its price but show the price as being marked down from a higher price

4. To discourage people from using plastic bags at grocery stores, people are suddenly charged $0.50 per plastic bag

5. No example can be given because Behavioral Economics does not exist

Answer 1

A)

(3) To encourage people to buy an item, you don't just show its price but show the price as being marked down from a higher price.

"Companies use Behavioral economics to analyse costumer behavior to come up with new strategies to boost sales. One such example is when businesses launch a product at a price that is higher than its intrinsic value, but offer it at a discount, so customers feel that they are getting a good deal. This makes the product more attractive to the customer and thus results in higher sales."

Therefore, options (1), (2), (4) and (5) are incorrect.