Much has been made of the fact that people don't consistently act with scientific rationality. What is meant by
rationality? Consider the three "systematic mistakes" discussed in your textbook. What are the costs of making those systematic mistakes? Is it possible to act irrationally, or is rationality defined by the individual's approach to decision making?
Rationality means making a decision that has the maximum benefit for the decision maker. Economic theories are based on the... View the full answer