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Imagine that you are driving a car down a highway at 55 MPH. You have been driving for some time now: there is little traffic and the road glides along smoothly. Your attention wanders. Suddenly you notice a car pulling out in front of you. You must quickly think whether to try to swerve out of its path or hit the brakes. The outcome of such situations - in which time is of the essence - depends on how quickly you assess the situation and take a sequence of actions.
The notion of reaction time in psychology is predicated essentially upon a information processing model of human thinking and cognition. According to the information processing model, cognition can be understood as a computational framework wherein a cognitive system receives information which it then stores internally (as 'representations'). The cognitive 'system' then manipulates those representations and executes actions that are judged to be an appropriate corrolary to the occuring of those representations.
The flow of cognition, according to this model, begins with sensation of a stimulus, through an attentive stage involving perception and planning, and continuing on to a response or action. Each stage in the process takes some amount of time; the reaction time is the duration of time it takes from occurance of an event (a stimulus) and the execution of an action in response to that event.