Question

Many workers know they should save for retirement, but they put off doing so. They reason that there is plenty of time to do so in the future when their bills are not as high as they are now. What psychological factor associated with behavioral economics explains this behavior?

Question 13 options:

a)	overvaluing the present relative to the future

b)	a sunk cost fallacy

c)	overconfidence

d)	a framing bias

Answer 1

Ans: Overvaluing the present relative to the future

Explanation:

The following 5 psychological factors influencs economic behavior of an individual:

• Sunk Cost Fallacy: When decisions are influenced by costs already incurred is called sunk cost fallacy.
• Framing Bias: The techniques used to guide people to make one decision over another is called framing bias.
• Overconfidence: When ambition of people exceeds the actual things is called overconfidence.
• Overvaluing the present relative to future: When people do not save enough for retirement.
• Altruism: It is the behavior that benefits another individual at a cost to oneself.

Thus, option [c] is correct answer.