Answer to Question #247388 in Microeconomics for hgh

Question

Titli has been going through a real rough patch in her life. She has been constantly bullied at her job, her family is also not keeping well, she has recently lost an expensive gold bracelet gifted by her mom. Financial consultancy that she has recently involved to manage her finances, Bhanwra Consultancy Pvt. Ltd., has advised her to invest in the stock market, which has been performing well, from past some time now. Titli is, however, skeptical about it and decided to instead park her funds with McDuck Bank in their fixed deposit scheme. Do you think Titli was acting rationally here? Why or why not? What can be the plausible reason(s) that can explain Titli’s choice?

Answer 1

In a market, individuals can make their choices on their individual behavior as they have various alternative to choose. 

In the given case, financial consultancy provided an option to Title to invest in the stock market, but she parked her funds in the fixed deposit scheme. By analyzing the given situation, it can be said that Titli's action can be rational according to her preferences. It is because she is a risk-averse person because she chooses less risky investment that gives relatively lesser returns than the investment with high risk and high returns.