Why do neoclassical economists make unrealistic assumptions about human capabilities when modeling economic behavior?

• A. To reflect the actual psychological limitations of decision-makers
• B. To simplify complex human behavior and make models more analytically tractable
• C. Because they believe all individuals have perfect information in reality
• D. Because irrational behavior is considered more common than rational behavior

Answer: (B)

Verified step by step guidance

1. Understand that neoclassical economics aims to create models that can predict and explain economic behavior using mathematical and analytical tools.
2. Recognize that human behavior is inherently complex, involving many psychological, social, and emotional factors that are difficult to quantify precisely.
3. Note that to handle this complexity, neoclassical economists make simplifying assumptions, such as perfect rationality and complete information, to reduce the number of variables and make the models solvable.
4. These assumptions are not meant to perfectly describe reality but to provide a clear framework that highlights key economic relationships and allows for logical deductions.
5. Therefore, the primary reason for these unrealistic assumptions is to simplify complex human behavior and make economic models more analytically tractable, enabling clearer insights and predictions.