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What is Rational Ignorance
It should be very well known to all that the prices are very much important in deciding the goods that would come into production. The prices are capable of carrying information and incentives for the agents or goods that are economic.
This is when rational ignorance comes to play. When there are goods that are priced too high, the customers try to ignore it. This is called rational ignorance.
The economists consider that the prices are important in allocating of resources too. It is dependent on how the consumers want it, this means that the preferences from the consumer side will determine how much of that particular product will be manufactured for the market. Apart from it, there are technical issues and the resources’ relative availability too that play a vital role.
An illustration On Rational Ignorance:
The Human Voting
In order to make this clearer, let us take an example. Let us assume the political scenario in a country. At the time of elections, there are many candidates who are standing for the post.
Each of them tries his best to convince the public that he would be the best one to take up the post. There is the electorate that keeps a few candidates and moves the others to their private lives.
This way it has the ultimate power to do things. This is done so in order to see that the leaders are facing the people more often than they should. The more they try coming into the public, the more the people will understand them.
What is Dollar Voting
This same is the scenario in the market place too. The citizens are voting here too. Only things are different. Each product is trying to convince the customers that there are the best in their filed.
The way in which customers vote here is by buying the product by paying money. Those products which receive the votes are the ones that are making a profit, and hence they would be produced more in number than the other products in the market.
In the case of lesser voting in terms of money for a company, they reduce their production. The dollar voting is something that denotes how well the firm is performing.
It must be noted that they are essential in giving feedback to companies. This is proof through the dollar voting, that the consumers are the ones who decide who stays in the market for long and not the producers.
This is known as consumer sovereignty. This way the dollar voting is a great way of choosing your leader among the products that are widely spread in the market.