Answer to Question #261336 in Microeconomics for Ruchi

Question

What are some areas where it makes more sense that households might optimize and where might they satisfice instead? What factors about a given choice do you think might influence how close a household comes to economically-rationally optimization?

Answer 1

Households may optimize in areas where they rely on rational calculations to make rational choices that will result in outcomes that are aligned with their own best interests. This is where there exists an association with concepts of rational actors and self interest.

Individuals who are driven by self interest make decisions that lead to benefits ( this is when optimization is achieved).

Households may sacrifice in areas where they have to consistently try and minimize losses, as they try to actively maximize their advantage.

Factors that may influence how close a household comes to economically rationally optimization are:

• Availability of resources.( availability of goods at an affordable cost)
• Planned buying.( Avoidance of impulse buying or buying due to pressure).