alFinamxYO University of Phoenix FUXywfp100r1-wi economic. xer lides chrome-exte

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alFinamxYO University of Phoenix FUXywfp100r1-wi economic. xer lides chrome-extension://bpmcpldpdmajfigpchkicefoigmkfalc/views/app.html s_worksheet (1).doc FP 100 WEEK 1 Econom × | Economic Concepts Worksheet FP/100 Version 1 Choose two of the following concepts discussed in this week's materials. Anchoring Mental accounting . Herd behavior Prospect theory Define each in your own words and explain how each could apply to your personal financial and credit decisions. Your entire response should be at least 100 words Write your responses here.>

Explanation / Answer

Herd behavior is a phenomena where one blindly copies behavior of others even though it might be rational or irrational. E. G while purchasing many goods like cars I involve myself in large loan debt simply to confirm to the values of others. Rationality should have limited my loan amount according to my own means.

Mental accounting refers to the tendency to seperate money into different accounts based on miscellaneous subjective criteria which often is quite irrational. E. G I have taken a loan for car but at the same time I have kept substantial amount of money aside for meeting other ends like vacations, bike etc. Thus leads to more interest payments because I don't utilize all my savings to finance car loans.

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