Question

Individuals may not act in the rational, calculating way described by the economic model of decision making, measuring utility and costs at the margin, but can you make a case that they behave approximately that way?

a) True

b) False

Answer 1

Though not precise, humans tend to approximate rational economic behaviors by weighing costs against benefits, seeking deals, and considering trade-offs in a way that reflects traditional economic models of decision-making.

Step-by-step explanation:

While individuals may not always act in the strictly rational, calculating manner prescribed by traditional economic models of decision making, there's evidence to suggest they do behave in a way that is approximately rational. Human decision-making indeed lacks the precision of budget constraints or production possibilities frontiers depicted in economics textbooks.

Yet, people still tend to weigh costs and benefits, even if not with exact precision. For example, consumers may not calculate the exact utility of every dollar spent, but they generally seek deals and avoid overspending on products that offer little relative satisfaction. Similarly, politicians may not use formal models to make budgetary decisions, but they consider trade-offs and public opinion which broadly reflect the concept of opportunity cost. These instances reflect an approximation of the rational decision-making process.