EBK PRINCIPLES OF MICROECONOMICS (SECON
EBK PRINCIPLES OF MICROECONOMICS (SECON
2nd Edition
ISBN: 9780393616149
Author: Mateer
Publisher: W.W.NORTON+CO. (CC)
Question
Book Icon
Chapter 17, Problem 1QR
To determine

Bounded rationality and its relevance in economic modeling.

Expert Solution & Answer
Check Mark

Explanation of Solution

The economic theory relies up on many assumptions and rules which are very difficult to be implemented in the real society. Thus, testing and studying the theory on a real economy becomes difficult process. This is handled with the help of the economic model which is the representation of the actual economy with the help of a set of variables and set of relations between them.

The bounded rationality on the other hand is the behavior of the economy which says that the people in the economy will never do the actual information gathering and calculations which are said to be happening in the economy. According to the theory, such information gathering and calculations are very important as they helps to make the optimal decisions by the society. The bounded rationality states that people either can’t or won’t do such collection and calculations.

The economic models assume that the people do the gathering and calculation of the available information to make the decisions. Thus, the bounded rationality is an important aspect that the economic model depends up on. Thus, the bounded rationality is relevant in economic modeling.

Economics Concept Introduction

Economic model:  The economic model is a theoretical construct representing the economic process with the help of a set of variables and a set o logical relationships between the variables.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!
Students have asked these similar questions
1) Use the supply and demand schedules to graph the supply and demand functions. Find and show on the graph the equilibrium price and quantity, label it (A). P Q demanded P Q supplied 0 75 0 0 5 65 5 0 10 55 10 0 15 45 15 10 20 35 20 20 25 25 25 30 30 15 30 40 35 40 5 0 35 40 50 60 2) Find graphically and numerically the consumers and producers' surplus 3) The government introduced a tax of 10$, Label the price buyers pay and suppliers receive. Label the new equilibrium for buyers (B) and Sellers (S). How the surpluses have changed? Give the numerical answer and show on the graph. 4) Calculate using midpoint method the elasticity of demand curve from point (A) to (B) and elasticity of the supply curve from point (A) to (C).
Four heirs (A, B, C, and D) must divide fairly an estate consisting of three items — a house, a cabin and a boat — using the method of sealed bids. The players' bids (in dollars) are:   In the initial allocation, player D Group of answer choices gets no items and gets $62,500 from the estate. gets the house and pays the estate $122,500. gets the cabin and gets $7,500 from the estate. gets the boat and and gets $55,500 from the estate. none of these
Jack and Jill are getting a divorce. Except for the house, they own very little of value so they agree to divide the house fairly using the method of sealed bids. Jack bids 140,000 and Jill bids 160,000. After all is said and done, the final outcome is Group of answer choices Jill gets the house and pays Jack $80,000. Jill gets the house and pays Jack $75,000. Jill gets the house and pays Jack $70,000. Jill gets the house and pays Jack $65,000. none of these
Knowledge Booster
Background pattern image
Recommended textbooks for you
Text book image
Economics (MindTap Course List)
Economics
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Cengage Learning
Text book image
Microeconomics
Economics
ISBN:9781337617406
Author:Roger A. Arnold
Publisher:Cengage Learning
Text book image
Macroeconomics
Economics
ISBN:9781337617390
Author:Roger A. Arnold
Publisher:Cengage Learning
Text book image
Economics Today and Tomorrow, Student Edition
Economics
ISBN:9780078747663
Author:McGraw-Hill
Publisher:Glencoe/McGraw-Hill School Pub Co
Text book image
MACROECONOMICS FOR TODAY
Economics
ISBN:9781337613057
Author:Tucker
Publisher:CENGAGE L
Text book image
Micro Economics For Today
Economics
ISBN:9781337613064
Author:Tucker, Irvin B.
Publisher:Cengage,