Economics Supply And Demand Questions
Bounded rationality is a concept in economics that suggests individuals and firms make decisions based on limited information and cognitive abilities. It recognizes that decision-makers have constraints, such as time, knowledge, and computational abilities, which prevent them from fully analyzing all available information and considering all possible alternatives. Instead, individuals and firms use simplified decision-making strategies, such as heuristics or rules of thumb, to make choices that are "good enough" given their constraints. Bounded rationality acknowledges that decision-making is often influenced by cognitive biases and the need for efficiency, leading to suboptimal outcomes.