The more you spend - During an economic downturn, staying within a budget at the grocery store may be more important than ever for many shoppers, especially those with low incomes. But a new study shows that the harder shoppers try to figure out how much they're spending, the WORSE they do. Is this some kind of conspiracy?
Marketing expert Koert van Ittersum says, "When shopping in a grocery store, the chaotic, information-rich environment can tax a shopper's ability to mentally calculate the total basket price. Executing many arithmetic operations with multi-digit pricing is demanding. Our findings show that shoppers tend to be more accurate when they employ short-cut strategies in their calculations."
Examining the behavior of shoppers in both a high-income and low-income grocery store, the researchers learned that strategies employed by consumers to keep mental computation simpler include rounding prices up or down, combining compatible prices (for example, $1.19 plus $0.82 is almost $2), and multiplying an estimated average price by the number of items in their basket. These short cuts tend to work better than trying to calculate the total sum down to the last penny.
According to their study, almost 85% of shoppers "at least sometimes" keep track of how much they are spending at the grocery store. And on average, they underestimate their total basket prices. Van Ittersum says, "Our results show that shoppers on tight budgets, those most motivated to be accurate, may also be most at risk for spending more than their budget."
Is our economy really recovering as quickly government statistics say sit is? Traditional ways of economic activity greatly overstate the standard of living as experienced by the average person. Economist Matthias Ruth says, "This is not merely a question of dueling statistics: The difference in the two figures can be startling and represents very different pictures of our standard of living. In 2000, the classic economic measure showed Maryland more than 50% wealthier than we actually were." This could affect the distribution of government bailouts, not to mention the "pork" projects demanded by representatives in congress.
Ruth says, "The traditional measure is inflated by costs that are counted as if they were benefits, such as the conversion of agricultural lands and coastal areas to strip malls and developments. It failed to capture many aspects of life we value, from environmental quality to livable communities."
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