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1. Economic theory assumes consumers are rational. Still, in practice, we see a lot of irrational...

1. Economic theory assumes consumers are rational. Still, in practice, we see a lot of irrational behavior. Give an example(s) of irrational economic decision-making.

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Answer #1

In the real world, we the consumer often behaves in an irrational way i.e. decisions which don’t maximise utility however cause a loss of economic welfare. For example:

-- For majority of people, the same glass of juices would taste better when poured from a $500 bottle than from a $50 bottle.

-- When a consumer paying $5.59 for a cup of coffee would not make sense when there's equally-good cheaper coffee across the street.

-- When a consumer focus on a study which states that one glass of red wine a day is extremely beneficial for health and afterwards makes the assumption that any quantity of alcohol would be beneficial for them

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