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10 January, 12:41

Which of the following statements best demonstrates the concept of bounded rationality?

A. Individuals make decisions as if they had understood and examined every possible alternative.

B. Individuals make short-run choices that are not consistent with their long-term goals.

C. Individuals do not intentionally make decisions that would leave them worse off.

D. Individuals act in their own self-interest.

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Answers (1)
  1. 10 January, 12:57
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    The correct answer is option B.

    Explanation:

    Individuals always make decisions that they believe would make them better off. They never make any decision intentionally that makes them worse off.

    But while making decisions the individuals cannot examine all the choices available to them because it will take too much time. So they generally follow the rules of thumb while making decisions.

    Individuals often make short run decisions which are not compatible to their long term goals. This is an example of bounded rationality.
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