Choose one of the four models discussed in the lesson and explain the benefits and drawbacks of using the model. In your answer consider these points:

Question

What does the model explain?

What criticisms are made of the model?

What is the net utility of the model based on those points

Answer 1

One of the four models discussed in the lesson is the Rational Economic Model. This model explains how individuals and organizations make decisions based on rational thinking and economic factors, such as costs and benefits.

Benefits of using the Rational Economic Model include its simplicity and clarity. It provides a clear framework for decision-making, as it considers all relevant information and weighs the costs and benefits of different options. This can lead to more informed and logical decision-making, which is especially useful in a business context.

However, there are several criticisms of the Rational Economic Model. One criticism is that it assumes individuals are completely rational, when in reality, humans are often influenced by emotions, biases, and social factors. People do not always make decisions solely based on economic calculations. Additionally, the model assumes perfect information, which is rarely the case in the real world.

Considering these points, the net utility of the Rational Economic Model is mixed. It provides a structured approach to decision-making, which can be useful in certain scenarios, particularly in business contexts where rationality and economic factors play a significant role. However, it fails to account for the complexity of human decision-making and the limited availability of perfect information. Thus, while it can provide a useful framework, it should be used in conjunction with other models and approaches that consider the broader range of influences on decision-making.