Hi As we all know that economics law is true if the consumer behaves rationally. Hence the foundation of all economics law is rationality in consumer behavior. Rationality means behavior of consumer using proper reasoning process in any given situation. Let's first understand the concept of Rationality: Despite some misconceptions, consumer rationality is a property of the researcher rather than the consumer. Consumers become more rational as we are better able to predict their behavior or other important outcomes influenced by their behavior. Perfect rationality results when we achieve accurate predictions. Consequently, at least for many Marketing Science articles, consumers are becoming more rational as we find better ways to predict. However, some experimental consumer behavior articles find the opposite. The difference between experimental and statistical controls explains the divergence in conclusions. Experimental controls test rationality based on whether ...
Hello Friends! We will now begin with discussion of the relationship between financial markets and economic efficiency. Financial markets facilitate mutually beneficial intertemporal exchanges by organizing trading in financial securities. These securities, and the information contained in their prices, enable individuals to reach higher levels of lifetime utility than would be possible in the absence of financial markets. We begin this chapter with a brief treatment of financial securities, followed by a discussion of the more important tasks that financial markets must perform to be economically efficient. We include brief treatments of two kinds of market failures. We conclude with a general discussion of informational efficiency and the efficient markets hypothesis. 2.1 Financial Securities A financial security is a saleable right to receive a sequence of future payments. The size of each future payment can be either guaranteed or determined by the outcome of some...