How do markets work?Explain what is implied by the assumption that decision makers are rational. How reasonable is it to view decisions about marriage and divorce as rational decisions? Economic theory has a difficult task. It's basically trying to distill the complexity of thousands of thought processes, all types of transactions, and other various decisions that we make every day, all of which are affected by countless variables, into bite-sized pieces. easy-to-understand individual theory. This can then surely be forgiven, by eliminating one small variable, namely the rationality of the decision maker, which you and I take for granted every day. It is true that very few economic theories do not take rational consumer behavior for granted and even fewer would be able to function effectively without this being the case. The question here challenges us to explore the validity of the consumer's claim of unquestionable rationality and what it really means when we take it for granted that everyone would always act rationally. What would be the implications for the applicability of economic theory if the economists' hypothesis turned out to be incorrect, or even if it were completely true? I will attempt to explore the implications of this hypothesis using examples showing where it forms a key part of how economic theory works, where a point in the mechanics of a theory arises when the truth or otherwise of the hypothesis of consumer rationality. suggests is that of marriage, and whether it is appropriate to affirm that such a step can be considered a rational step given the factors influencing the decision and surely, in this context, the economic consequences on top of that. It follows then that the implications of the assumption that all decision makers are rational are manifold for economic theory. Fundamental supply and demand, and the resulting equilibrium that characterizes the market economy, are based primarily on rational decisions made by consumers. The theory suggests that the price of goods tends to balance because consumers act rationally. If the price of a good is below its equilibrium price, it is likely that many consumers will decide that they will derive more utility from consuming that good than from consuming any other good they could buy at the same price. They would derive more satisfaction from this good than the opportunity cost of purchasing it. Conversely, if the price is above equilibrium, supply and demand tell us that it is because consumers rationally assert that the opportunity cost of the purchase is greater than the satisfaction they they take away..