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Aryan · 2024-10-16T03:11:53.836Z

#rationality #irrationality #economics • Behavioral economics talks about the study of rational and irrational decisions • Rationality : Rationality talks about the decisions made by individuals and firms that follow the principles of economics or are good decisions • Irrationality : Irrationality talks about the decisions made by individuals and firms that go against the principles of economics and are considered as bad decisions which lack quality • In opportunity cost some individuals and firms choose irrational decisions which leaves out the best alternative rational decision • Behavioural economics is considered as the psychological part of economics Proper Rationality • Traditional -: Traditional economics carries the expectation of always having rational decisions and principles when a product is consumed or produces • Economics -: Before a product is consumed or produced rationality is expected to gather all the information about the production and the consumption for a fair trade-off, these kind of trade-offs should be the path of proper principle economics • Rational Rule -: Before a product is consumed or produced rationality expects the individual to take time to take the most traditional option which doesn't leave out the next best alternative in opportunity cost Behavioural Economics - Irrationality • i) Time ii) Info iii) Choice • Time -: Mostly irrationality occurs when consumers don't have time to go through all of these as they cant maximise so much utility in a minimum amount of time • Info -: Sometimes in the economy there might be lack of information about the principles and the product which leaves out the producer and the consumer with no base or principle which leads them to irrationality, there might also be imperfect information and other kind of limitations • Choice -: Choices in a economy are just too much, there would be a lot of choices but from there choosing the best one might be tuff as there might be certain limitations, that is why most of the individuals and firms lack principle and choose a irrational decision Behavioural Economics

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Aryan

Oct 16

Crash Course - Passionate Economics

in Aryan

#rationality #irrationality #economics

Behavioral economics talks about the study of rational and irrational decisions
Rationality : Rationality talks about the decisions made by individuals and firms that follow the principles of economics or are good decisions
Irrationality : Irrationality talks about the decisions made by individuals and firms that go against the principles of economics and are considered as bad decisions which lack quality
In opportunity cost some individuals and firms choose irrational decisions which leaves out the best alternative rational decision
Behavioural economics is considered as the psychological part of economics

Proper Rationality

Traditional -: Traditional economics carries the expectation of always having rational decisions and principles when a product is consumed or produces
Economics -: Before a product is consumed or produced rationality is expected to gather all the information about the production and the consumption for a fair trade-off, these kind of trade-offs should be the path of proper principle economics
Rational Rule -: Before a product is consumed or produced rationality expects the individual to take time to take the most traditional option which doesn't leave out the next best alternative in opportunity cost

Behavioural Economics - Irrationality

i) Time ii) Info iii) Choice
Time -: Mostly irrationality occurs when consumers don't have time to go through all of these as they cant maximise so much utility in a minimum amount of time
Info -: Sometimes in the economy there might be lack of information about the principles and the product which leaves out the producer and the consumer with no base or principle which leads them to irrationality, there might also be imperfect information and other kind of limitations
Choice -: Choices in a economy are just too much, there would be a lot of choices but from there choosing the best one might be tuff as there might be certain limitations, that is why most of the individuals and firms lack principle and choose a irrational decision

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