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Rational and Irrational Behaviour (Rationality ("Consumers always…
Rational and Irrational Behaviour
Rationality
"Consumers always make rational decisions to maximise their utility when buying a good or service"
neo classical economists -> "homo-economicus"
Three steps to making a rational decisions
1.
Gather all the information
2.
Weigh up all the information.
3.
Take time to make a utility maximising decision
Behavioural
1.
Time
To make a truly rational decision, you must have three things
3.
Information
Consumers are often affected by habit e.g. smoking cigarettes
2.
Choice
Lack of self control and this problem of habits is the counter argument for rationality
Data Response Notes
2. a.
In india, the people who met more often were more aware and also more similar in what they did. had they not been in a group perhaps they would have acted differently.
b.
Tesco are trying to stop habitual behaviour by making it less easy for the consumer to make a poor decision by purchasing sweets.
1.
Consumers making educated decisions to maximise utility of a product that they buy - Homo economicus
c.
People who had Peso loands could not make the correct calculations. Only when it was laid out more simply, the understanding was increased.