Economics Articles

Essays on topical issues, latest developments in UK and global economies, and answers to readers questions

Life-Cycle Hypothesis

Posted on May 24, 2017

The Life-cycle hypothesis was developed by Franco Modigliani in 1957. The theory states that individuals seek to smooth consumption over the course of a lifetime. Graph shows individuals save from 20 to 65 As a student, it is rational to borrow to fund education. Then during your working life, you pay off student loans and …

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Sunk Cost Fallacy

Posted on May 22, 2017

The sunk cost fallacy is when we continue an action because of our past decisions (time, money, resources) rather than a rational choice of what will maximise our utility at this present time. For example, because we order a big meal and have paid for it, we feel a pressure to eat all the food. …

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Price of Car Parking in City Centres

Posted on May 18, 2017

On a recent visit to New York, my friends took me to a popular part of Queens to an Indian restaurant. Because it is a popular area it was very difficult to find a car parking space. We ended up driving round in circles for 15 minutes before a space finally became available. When we …

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