Question

Discuss behavioral life cycle theory. Do you believe it is realistic?

Answer 1

Under behavioral life cycle theory, it is assumed that people, in general, will plan their consumption as well as saving over their life cycle. The theory says, that consumer will tend to save in the period in which he earns and tend to spend in the period in which he is retired. However, he or she will maintain a stable ratio of saving and expenses even when they are earning. It means they will not spend too much, nor they will save everything. The consumption pattern of individual will change over his or her life cycle. The things that he may consume today, will not be relevant for the person few decades from now. In my opinion, the theory seems realistic, this is because the theory is based on very humans nature and behavioral pattern. It shows that tastes and preferences of consumer changes as time goes, all due to change in behavior of consumer.