Standard Economic Theory Limitations: Behavioral Economics Solutions
Standard Economic Theory: A Foundation with Flaws Standard economic theory (SET), also known as the standard model, rests on the assumption of homo economicus – the perfectly rational individual who always makes choices to maximize their self-interest. While this simplified model provides a useful framework for understanding basic economic principles, its limitations become glaringly obvious when confronted with the complexities of real-world behavior. Does everyone always meticulously calculate the marginal utility of every purchase?...