Asked by Tommy Clobes on Jul 11, 2024
Verified
Joshua is tired of school as well as his part-time job and decides on the spur of the moment to take a weekend trip to Cabo San Lucas.He pays for it with his credit card,rather than with money from his checking account.Which type of irrational behavior does this BEST represent?
A) status quo bias
B) mental accounting
C) loss aversion
D) risk aversion
Mental Accounting
A concept in behavioral economics where individuals categorize and treat money differently depending on its source, intended use, or other psychological factors.
Irrational Behavior
Actions or decisions that do not logically follow from a rational analysis of the situation.
- Identify the range of behavioral biases and understand their impact on economic choices.
Verified Answer
BF
Brandon FajardoJul 16, 2024
Final Answer :
B
Explanation :
Joshua is exhibiting mental accounting because he is treating the credit card as a separate account from his checking account, even though it will still require payment later on. He is not considering the long-term consequences of using credit card debt to pay for expenses in the short-term.
Learning Objectives
- Identify the range of behavioral biases and understand their impact on economic choices.
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