Rationality Assumption: "Homo Economicus" (Ch 1)

Olivia t
Mind Map by Olivia t, updated more than 1 year ago
Olivia t
Created by Olivia t about 3 years ago


The rationality assumptions economists make, explained. chapter one

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Rationality Assumption: "Homo Economicus" (Ch 1)
1 3 rationality assumptions:
1.1 1. people are interested only in their own satisfaction
1.1.1 2. choices always align with long-term interests 3. people can consider every choice
2 you don't make yourself worse off on purpose
2.1 there's SO many ways to be irrational; only ONE way to be rational
2.1.1 studying rationality gives baseline- can easily notice deviation from baseline economics is focused on outcomes rather than thought process
3 bounded rationality: people are nearly rational; sometimes break from the 3 rationality assumptions; people use rules of thumb instead of considering all choices
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