Asked by Milan Golusin on Jul 25, 2024
Verified
In traditional economic theory, consumers are assumed to be rational, which means that they:
A) attempt to maximize utility, subject to a budget constraint, and they do so with a limited knowledge about prices.
B) have full knowledge of prices and attempt to maximize utility, subject to a budget constraint.
C) look to maximize utility, often without regard to income or prices.
D) behave in unpredictable but observable ways of choosing goods and services.
Rational Consumers
Consumers who make choices to maximize their utility, based on preferences, budget constraints, and available information.
Budget Constraint
An economic model that represents all the combinations of goods and services that a consumer can afford to purchase at given prices within their income level.
Prices Knowledge
Understanding of how prices are determined in markets and the factors that influence them.
- Understand the function of rationality in the behavior of consumers and producers as explained by traditional and behavioral economic theories.
Verified Answer
Learning Objectives
- Understand the function of rationality in the behavior of consumers and producers as explained by traditional and behavioral economic theories.
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