Predictably Irrational
Based from Conventional Economics, the field of Economics that we have dealt extensively in the previous lessons of this course, we were able to apply the idea that human beings make rational decisions by exercising their logical reasoning through careful calculation and examination of every available option so that it will be able to lead them to the maximization of their personal benefit, be it in terms of happiness and/or wealth. However, this was contradicted by Dan Ariely in Predictably Irrational. Ariely suggests that people are susceptible to unrelated influences such as norms, desires, and others. He also points out that people tend to be not as rational as the conventional economic theory since the assumption …show more content…
I personally think that this is where the concept of elasticity can become very helpful. As I recall on the discussion made with that concept, I was able to clearly imagine how it can affect the consumers. Let us take the scenario when a price hike to the gasoline would be done as a consequence of higher price of oil barrels being sold in the oil market. We may intuitively say that the demand for the gasoline will shift to the left, or will decrease to a certain amount as a result of price increase. But, the effect will not be the same if you look into the long-term because it is still a necessity for transportation from one place to another so consumers will still avail gasoline in spite of the high price established. Consumers also act predictably irrational when they feel ownership towards something. Ariely primarily argues that the more effort we put into something, the more ownership we feel. I believe that this is really the concept of trial offers to some products and/or services in the market. The consumer somewhat experiences comfort of being able to access the product without even owning it but becomes a trap when the consumer get used to it which affects his/her
Based from Conventional Economics, the field of Economics that we have dealt extensively in the previous lessons of this course, we were able to apply the idea that human beings make rational decisions by exercising their logical reasoning through careful calculation and examination of every available option so that it will be able to lead them to the maximization of their personal benefit, be it in terms of happiness and/or wealth. However, this was contradicted by Dan Ariely in Predictably Irrational. Ariely suggests that people are susceptible to unrelated influences such as norms, desires, and others. He also points out that people tend to be not as rational as the conventional economic theory since the assumption …show more content…
I personally think that this is where the concept of elasticity can become very helpful. As I recall on the discussion made with that concept, I was able to clearly imagine how it can affect the consumers. Let us take the scenario when a price hike to the gasoline would be done as a consequence of higher price of oil barrels being sold in the oil market. We may intuitively say that the demand for the gasoline will shift to the left, or will decrease to a certain amount as a result of price increase. But, the effect will not be the same if you look into the long-term because it is still a necessity for transportation from one place to another so consumers will still avail gasoline in spite of the high price established. Consumers also act predictably irrational when they feel ownership towards something. Ariely primarily argues that the more effort we put into something, the more ownership we feel. I believe that this is really the concept of trial offers to some products and/or services in the market. The consumer somewhat experiences comfort of being able to access the product without even owning it but becomes a trap when the consumer get used to it which affects his/her