Write a 4 page essay on Making a decision.Download file to see previous pages... The EU theory can be termed as crucial to the theory of economic behaviour. This emanates from the fact that economists

Write a 4 page essay on Making a decision.

The EU theory can be termed as crucial to the theory of economic behaviour. This emanates from the fact that economists employ this theory to create models of risk aversion. With the concepts proposed by this theory, it becomes possible for economists to exercise aversion to risks, which may be termed as large scale (Hastie &amp. Dawes 2). ii) Human preferences may have an impact on the expected utility theory. in this regard, therefore, the choices that humans make may violate the expected utility theory. One example of how human preferences may violate this theory includes through judgements and biases. Personal judgment may affect the decisions made in that humans may at times fail to recognise the importance of the utility that can be derived from purchasing a certain product. There are times when the pattern of preference may be based on making a comparison of the value of the product to the intuition that the decision maker has. As a result, the decision maker ends up violating the rules of the market and making choices contrary to the expected utility theory (Hastie &amp. Dawes 4). iii) Violation of the EU theory has some implications on the theory of decision making. this emanates from the fact that violating this theory influence the final decisions made. For example, violating the rules of the theory means that the decision maker will come up with a decision, which contradicts the market requirements. As such, a person may not make a decision based on priorities, as well as utility of the product purchased (Hastie &amp. Dawes 8). #2 a) Framing effect refers to a scenario that emanates from equally explaining problems encountered in decisions, and when these descriptions contribute to varying decisions. Framing effects are commonly encountered when discussing decision making and they have an impact on rationality. The inconsistent and incoherent nature of human decisions can be said to emanate from framing effects. Based on the framing effect, the ability of the decision maker to tolerate risks is influenced by the choices available to the decision maker (Gilbert 6). b) Several empirical studies ascertain whether the decisions that people make are affected by framing effects. One such empirical study is “taxonomy of framing effects” conducted by Levin, Schneider and Gaeth in 1998. Under this approach, the researchers categorise framing effects into risky choice framing, attribute framing, as well as goal framing. The best model to use is the attribute framing in the explanations of framing effects. Based on this model, there is a description of the attributes of an object with regard to both the positive and negative traits of the object. The study subjects have to assess the objects described. The findings indicate that objects given positive description tend to get favourable evaluations. as opposed to objects described negatively, which receive unfavourable evaluations. The findings also indicate that there tends to be risk aversion, whereby people prefer to make decisions, which have few risks. c) People make choices, which will have little risks and avoid choices that have high risks. This explains why people consider the positive attributes and traits of an object while there is little consideration for the negative traits and attributes (Hastie &amp. Dawes 12). #3 i) Loss aversion is a term used to refer to the fact that people feel more painful when they encounter a loss than when they experience some gain. Psychologically, losses tend to have greater powers than gains.