The table below shows the total utility associated with various units of goods X and Y.Table 7.5

-_____ is the understanding that perfect information is not likely to be available, and that as a result, people make decisions that in hindsight look irrational, but in reality are the rational results of a brain that is economizing.
A)Reasoning
B)Parametric determinism
C)Rational ignorance
D)Bounded rationality
E)Dynamic inconsistency

Question

The table below shows the total utility associated with various units of goods X and Y.Table 7.5
 
-_____ is the understanding that perfect information is not likely to be available, and that as a result, people make decisions that in hindsight look irrational, but in reality are the rational results of a brain that is economizing.
A)Reasoning 
B)Parametric determinism 
C)Rational ignorance 
D)Bounded rationality 
E)Dynamic inconsistency

Quizplus · Accepted Answer

Bounded rationality is the understanding that perfect information is not likely to be available, and as a result, people make decisions that are rational with the available information. This concept recognizes that the human brain has limited capabilities and must often economize on the use of cognitive resources. It explains why people may make decisions that, in hindsight, may seem irrational, but were actually the most rational decisions based on their limited cognitive capacity and the available information.

The Table Below Shows the Total Utility Associated with Various