Rational Decision Making Flashcards
1
Q
What is assumed neoclassical and classical economics
A
Consumers are rational
2
Q
Rational Consumers make their choices with the aim of?
A
Maximising utility
3
Q
What is the rational rule
A
You do something until marginal benefit = marginal cost
4
Q
What is bounded rationality
A
Consumers have limited attention, knowledge and ability to understand complex decisions
5
Q
What is information gaps
A
When consumers have insufficient knowledge to make an optimal decision
6
Q
What is marginal utility
A
The change in total utility when an extra unit of output is consumed.
7
Q
What is maximum utility
A
When marginal utility is 0
8
Q
What is irrational behaviour
A
Behaviour that’s unreasonable and illogical
9
Q
What is marginal private cost
A
Internal cost to the supplier of supplying another unit
