arise from changes in income or price, not just effects on the one product that might seem most immediately

affected.

6.3 Behavioral Economics: An Alternative Framework for Consumer Choice

LEARNING OBJECTIVES

By the end of this section, you will be able to:

• Evaluate the reasons for making intertemporal choices

•

Interpret an intertemporal budget constraint

• Analyze why people in America tend to save such a small percentage of their income

As we know, people sometimes make decisions that seem “irrational” and not in their own best interest.

People’s decisions can seem inconsistent from one day to the next and they even deliberately ignore ways to

save money or time. The traditional economic models assume rationality, which means that people take all

available information and make consistent and informed decisions that are in their best interest. (In fact,

economics professors often delight in pointing out so-called “irrational behavior” each semester to their new
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