8-2 Discussion Frontiers of Microeconomics

What are the human behaviors economists should observe when creating economic models?
Example: people tend to find solutions that are good enough, but not the best solutions.

Thank you for all the help this course, and the knowledge that I have learned! With that being
said, I am so glad this will all be over this Sunday! This class has really been rewarding for me,
and I will most certainly use what I learned these past 8 weeks. I was worried about this class,
but it has not been as bad as I thought at first.

When an economist is observing economic models, they should be considering some behavioral
economic factors. Although these are often overlooked, they can be very important to better
understand the decisions people are making.

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This first factor to examine is that people are not always rational with their decisions. People can

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be impulsive, confused, and emotional, and shortsighted (Ch 22-3a). An example from the book

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goes to the 401K assumption that economist may have regarding human decision to take
opportunity to putting in the maximum amount available to them with the employer to gain that

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extra income later in life, but people are unpredictable at times for no reason. People could
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choose to put in the minimum, and therefore that would be oversight for an economist in study.
They can be overconfident in their metrics of measure for people/markets.

Some other factors that should be considered are people are drown to fairness, people are
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inconsistent over time. When you are trying to predict economics, it is important to understand
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how people feel about things going into the market. Whenever there is give or take to a situation
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people are not ok with things being strayed from a 50/50 percent of people/markets succeeding
or failing. People also change after time, and things need to be reevaluated to understand
current trends in markets.
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