Question 'Identify the main varieties and applications of the Essay

Question 'Identify the main varieties and applications of the 'standard model' of human behaviour in economics (as identi - Essay Example The main goal of these economic theories is to describe and give explanation to relations between economic phenomena. In order to achieve this, the theories are based on a number of assumptions (Baddeley, 2013:56). This explains why the concept of behavioural economics is important as it gives more explanatory power to the economic theory by giving it realistic psychological basis (Wilkinson and Klaes, 2012:1). This goes ahead to prove that behavioural economics seeks to augment the standard model of analysis, not to replace it. The standard model discussed in this paper is used to critique and understand behavioural economics. Outline of the standard model of individual economic behaviour The standard model in economic behaviour is also commonly referred to as the neo- classical model. It is a well established model in the subject of consumer choice and consumer welfare. The standard framework in behavioural economics is basically a decision making model that is normative and descri ptive in nature. Additionally, it associates the concept of self interest with maximising utility. This is owing to the fact that the model accurately defines how people behave and gives advice on how they should behave to attain specific goals and objectives. Assumptions Economic Rationality This assumption is based on the fact that acts rational so as to maximise utility. Economic actors face complex situations and a rational decision model describes how most people would act in such situations (Kahneman, 2011:86). The simple model of economic rationality is only applicable to uncertain decisions hence the outcomes are unambiguously related to the actions (Wilkinson and Klaes, 2012:5). This is the most important assumption in the model in fact, the model is referred to as the economic model of rationality. Rationality is a broad term that refers to the everyday reasoning. This interpretation is too complex in the economics context. To explain this assumption further, consumers der ive satisfaction or benefits from a particular activity. This is what is commonly referred to as utility in the field of economics. The standard model explains the benefits associated with consuming a good based on monetary value and other benefits including satisfaction. People have known Preferences This explains why the concept of consumer preferences was introduced the simple model of economic rationality is only applicable to uncertain decisions hence the outcomes are unambiguously related to the actions (Wilkinson and Klaes, 2012:6). In this context, individuals are assumed to weigh between different preferences and choose one that gives the preferred outcome (Thaler and Sunstein, 2008:379). There are two assumptions concerning the nature of consumer preferences. First, there is completeness that states that consumers consider an ordering across all the alternatives. Secondly, individuals are assumed to make rational choices. People Make Decisions Based on Full Information The standard model assumes that individuals are able to perfectly evaluate their own

Smart Home For The Aged Literature review Example | Topics and Well Written Essays - 10000 words

Smart Home For The Aged - Literature review Example The present smart home designs have shifted their focus from automating the physical activities of the elderly to the disciplining of their minds. They have turned into persuasive agents that focus much of their attention on making the elderly self-sufficient from their home space. Smart homes for the elderly focus on the management of everyday activities. Even though efficient, the act of delegating the management of household tasks to intelligent technological agents is set to experience a few vulnerabilities. Population aging is a common issue affecting most parts of the world. In fact, the generation of people aged 60 and above is expected to rise to surprising levels in the next few decades. The same age group makes up close to 11% of the total population in the world (Miller, 2012). The latest estimates indicate that over 22 percent of the population across the world will constitute those above 60 years of age by 2050 (Harper, 2003). The extraordinary pattern of expected changes has elicited a lot of concern in various countries due to a number of reasons. One major reason is that the elderly generation produces and contributes little to the economy as compared to the working-age population. Thus, the rate of economic growth is expected to be slow since a greater population will consist of the older generation. Another reason for alarm is that a greater segment of the population consisting of the elderly will require much support from the smaller percentage of adults who are economically active. Lastly, the elderly population will impose a huge burden on the economy due to their large number. The elderly need more medical care as compared to the younger generation and this can be expensive to the economy (Harper, 2003). However, the issue is of major concern to many countries across the world. The paper considers how the introduction of smart