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Bounded rationality

What bounded rationality means in economics, as one of where real decisions depart from the model, with an example and a question to test yourself.

Definition
Bounded rationality
Bounded rationality is deciding within limits of information, time and the ability to process it, so people settle for a choice that seems good enough rather than searching for the best.
Example

Can you think of an example of bounded rationality?

Test yourself

Can you name the four ways real decisions depart from the rational model?

Learn it properly: the module

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