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In Business / High School | 2025-07-08

In comparison with behavioral economists, traditional economists operate with the assumption that ________. (A) When money is involved in a decision, people constantly think irrationally (B) When people make decisions, they think rationally (C) When scarcity is involved, people make choices (D) When people encounter a variety of situations, they fluctuate between rational and irrational decisions

Asked by JTorres8085

Answer (1)

Traditional economists often operate with the assumption that (B) When people make decisions, they think rationally.
This assumption is a core concept in classical economics, which suggests that individuals, when faced with making choices, act as rational agents who seek to maximize their utility. This means they evaluate all available information, consider the benefits and costs of their options, and then make decisions that are in their best interest.

Rationality in Economics : Traditional economics is based on the idea of 'homo economicus' or 'economic man' who acts rationally. Such a decision-maker is expected to have clear preferences, assess the utility or value of different options, and consistently make choices that maximize their personal satisfaction or benefit.

Behavioral Economics : In contrast, behavioral economists recognize that individuals often deviate from rationality due to cognitive biases, emotions, and social influences. Behavioral economics incorporates psychological theories into economics to better understand decision-making processes that are not always rational.

Rationality Assumptions : The assumption of rationality simplifies the analysis of economic problems and the prediction of economic behavior. Economists use models based on rationality to understand how markets function and to predict outcomes.


In summary, the key difference highlighted in the question is between the rational model of traditional economics and the acknowledgment of irrational behaviors by behavioral economists. Therefore, the best choice from the given options is (B) When people make decisions, they think rationally.

Answered by OliviaMariThompson | 2025-07-22

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