Rational Decision Making Flashcards
What is assumed about Rational Decision Making?
It is always assumed that consumers will act rationally, which is for consumers to maximise utility. This is when consumers purchase goods that are a good deal or of high quality.
When May Consumers Act Irrationally?
Consumers May Act Irrationally because:
Habitual Behaviour - ‘Playing it Safe’ by sticking to known items they trust. Or consuming addicting goods eg cigarettes.
Wealth - People may not be able to afford a good to maximise utility eg healthy food
Influence of Other People’s Behaviour - Eg may be a boom in the housing industry, which many people investing. Due to popularity, consumers may also invest. Social pressure to consume demerit goods is also a factor.
Sticking to the Status Quo (Staying with their current situation)
