Economics has suddenly become a hot topic. New books are being published that break down economics for those of us who are challenged by the subject. Jean Chatzky talks with Tim Harford, a writer for the Financial Times and author of The Undercover Economist. Tim talks about why economics is now a sexy subject, and how you can apply it to your everyday life.
Economics is about more than just money—it's how we respond, either rationally or irrationally, to the trade-offs that are always facing us, Tim says. We can't do everything we want, so we have to make choices.
Retailers deliberately make it less attractive to buy cheaper products, Tim says. At least one coffee company offers you three sizes of coffee cups, but doesn't publicize a fourth, small size, because they want you to pay more.
"Product sabotage" is when companies actually spend money to make a less expensive product seem worse, so you'll buy the more expensive model.
Economics affects your dating life, Tim says. Take a speed-dating event. You wouldn't be surprised to learn that tall men, thin women and high-earners get more offers for dates. But if you go to an event where all the men are under six feet tall, they get just as many offers—people adjust their standards to what they think they can get at the time.
People feel richer when they spend money on experiences rather than on material possessions.
If you spend a lot of money on something, that's a choice you can't easily reverse. As long as you have the time, bide it until you're positively sure you're making the right decision.