Exploring the intersection of psychology and economics: understanding consumption patterns and decision-making behaviors among low-income populations

Abstract

This paper combines psychology and economics to better comprehend consumption habits and decision-making among the low-income groups. The study employs a mixed methodology that includes surveys and behavioral experiments to look at the role that economic constraints and psychological conditions play in subsistence-level consumption decisions. The questionnaire gathers quantitative information about spending habits, financial planning and spending, and the experimental section modelled decision-making to see how people use limited resources. Key results show that low-income individuals prioritize short-term rather than long-term needs, have present bias, and make impulse decisions when stressed. And cognitive biases, like loss aversion and overconfidence, also impact decision-making in this population. These findings are significant for psychological and economic research, and they rebuke the rationality hypothesis in conventional economic models. The study also provides pragmatic advice to policymakers and corporations that the intervention needs to focus on both the mental obstacles to financial decision-making and the economic constraints of low-income people.