Rational behavior.
- Instead of behave in ways that are predictable, sensible and
logical, this type of behavior is known as Rational behavior.
- To behave rationally, we make decision and act in ways that
beast achieve our needs.
- Rational behavior is goal oriented.
- Rational behavior occurs when we are pursuing goals in
accordance with their preferences and priorities
1) If society uses rational behavior why do some lottery
winners go broke.
Reasons:
- Tax obligation create various complications.
- The payout is much less than expected.
- Mental accounting changes how they think of money.
- No financial advise and Plans.
- They spent uncontrollably on things they don't need.
- Bigger home and Fancier vehicles mean more bills.
- They make bad investment trying to earn more money.
- No savings
- Social media makes it difficult to hide the fact that you have
won.
- They may slip into depression and spend more on drugs and
alcohol.
Economist always assumes the rational behavior is this a
reasonable assumption:
- Rational behavior assumption is not always correct. In the
broad sense person behaves rationally but in many times he get
influenced by the emotion or other circumstances.
- When emotions occur at the moment of decision and are directly
related, than person not behaves rationally.
- Incidental emotions also effects the rational behavior.
example: I am very happy because my team has win the cup and now i
m choosing what to have for dinner. The economist believes purely
on rational behavior would say that my happiness should not affect
what I eat.
- It is proof that the incidental emotions affects our judgement
decision making and reasoning.
Is rational behavior assumption is a reasonable
assumption? positive or normative assumption? how does self
interest come into play.
- The rational behavior assumption is a reasonable assumption,
because normal person always behaves rationally and think about his
more advantage untill and unless any emotional dilemma occurs .
Conclusion is this that the Rational behavior theory is suitable in
most of cases unless there is some unusual situation.
- Rational behavior assumption is positive assumption declared by
the science
- In any circumstances where a person can get more benefit but
the activity is illegal or against any public policy, the self
interest come into picture and person behaves rationally for more
benefit.
Why economics is science or social science
- Economics is regarded as a social science because it uses
scientific method to build theories that can help to explain the
behavior of individuals, groups and organization.
- Economics attempts to explain economic behavior which arises
when scarce resources are exchanged.
- Economics can never be exact science, and is a different kind
of discipline.
- Science has the laws but the laws of economics are depends on
the behavior of the individual, firm or industry, hence the
economics is the social science and not the science