Rational decision-making

Rational decision-making

Courses Info

Level: AS Levels, A Level, GCSE – Exam Boards: Edexcel, AQA, OCR, WJEC, IB, Eduqas – Economics Revision Notes 

Rational Decision-Making

Traditional neo-classical economists believe that consumers act rationally by making decisions that maximise their utility. They also believe firms act rationally to maximise their profits.

However, many economists have challenged this school of thought with another called behavioural economics

What is Utility?

Utility is the satisfaction a consumer gets from the consumption of a product or service.

Behavioural Economics

Behavioural economists believe that consumers and producers make decisions using the process of psychology e.g. emotions and habits


Quick Fire Question – Knowledge Check

1. Explain the two Neo-classical assumptions of Rational Decision-Making (4 marks)

2. Define ‘Utility’ (2 marks)

3. Explain what is meant by ‘Behavioural Economics’ (2 marks)


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