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RATIONAL CHOICE
RATIONAL CHOICE
 Rational choice theory is an economic
principle that states that individuals always
make prudent and logical decisions.These
decisions provide people with the greatest
benefit or satisfaction — given
the choices available — and are also in their
highest self-interest.
Basic Principles of Rational
Choice
 •Individuals are rational.
 –They can think in a logical way
 •Individuals have interests.
 –Different people have different interests.
 –The interests of a person define her utilities.
 •Individuals make choices.
 –The choices people make influence their utilities.
 •Individuals make choices in a rational way
toincrease their utilities.
 –A person does not have full control over the results
of herchoices
EXAMPLE SITUATIONS
Rational choice

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Rational choice

  • 2. RATIONAL CHOICE  Rational choice theory is an economic principle that states that individuals always make prudent and logical decisions.These decisions provide people with the greatest benefit or satisfaction — given the choices available — and are also in their highest self-interest.
  • 3. Basic Principles of Rational Choice  •Individuals are rational.  –They can think in a logical way  •Individuals have interests.  –Different people have different interests.  –The interests of a person define her utilities.  •Individuals make choices.  –The choices people make influence their utilities.  •Individuals make choices in a rational way toincrease their utilities.  –A person does not have full control over the results of herchoices