Correct option is D
The core of consumer rationality in economics is based on how individuals make decisions to maximize their utility or satisfaction. Rational consumers act logically and base their choices on the following characteristics:
Non-satiation: Rational consumers always prefer more of a good or service, provided it gives positive utility. This is a fundamental assumption in utility theory.
Selfish Motive: Rational consumers prioritize their own interests and benefits when making decisions, seeking to maximize their personal utility.
Clarity of Preferences: Consumers have well-defined preferences and are able to rank their choices consistently. This allows them to make decisions that align with their goals.
Possession of Information: Rationality assumes that consumers have sufficient information about goods, services, and alternatives to make informed decisions.
Information Booster:
Key Characteristics of Rational Consumers:
- Maximization of Utility: Consumers aim to achieve the highest satisfaction possible within their budget constraints.
- Marginal Decision Making: Rational consumers consider the marginal benefits and marginal costs before making decisions.
- Time Consistency: Preferences are consistent over time, and consumers avoid contradictory decisions.
- Budget Constraints: Decisions are made keeping financial limitations in mind.
- Choice under Certainty and Uncertainty: Consumers make decisions based on the available information, even when outcomes are uncertain.
Additional Knowledge:
Homogeneous expectations (Option 1) is not a core characteristic of consumer rationality. It relates more to market dynamics, where expectations about prices or market behavior might align, but it is not an inherent trait of rational consumers. Homogeneous expectations pertain to group behavior in economic models, not individual rationality.
English
10 Questions
20 Marks
12 Mins
