Behavioral economics
... Do People Make Their Choices Rationally? Ignoring Nonmonetary Opportunity Costs Opportunity cost The highest-valued alternative that must be given up in order to engage in an activity. ...
... Do People Make Their Choices Rationally? Ignoring Nonmonetary Opportunity Costs Opportunity cost The highest-valued alternative that must be given up in order to engage in an activity. ...
what is utility?. maximization of individual utilities
... idea that demand must be related to "utility." this may seem self-evident: the more useful a thing is, the more satisfaction it gives, the more people would be willing to pay for it. However, Smith saw a difficulty with this argument. The problem Smith posed has come down to us as the "Paradox of Di ...
... idea that demand must be related to "utility." this may seem self-evident: the more useful a thing is, the more satisfaction it gives, the more people would be willing to pay for it. However, Smith saw a difficulty with this argument. The problem Smith posed has come down to us as the "Paradox of Di ...
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Ch08A-7e[1]
... The indifference curve model is powerful because it enables us to derive the downward-sloping demand curve from the assumption of diminishing marginal rate of ...
... The indifference curve model is powerful because it enables us to derive the downward-sloping demand curve from the assumption of diminishing marginal rate of ...
ppslide_econ_week_3
... With so many curves floating around, it is worth reviewing their roles in consumer decision making: • The budget line shows the affordable combinations of two goods, representing the consumer’s constraints. • An indifference curve shows the different combinations of two goods that generate the same ...
... With so many curves floating around, it is worth reviewing their roles in consumer decision making: • The budget line shows the affordable combinations of two goods, representing the consumer’s constraints. • An indifference curve shows the different combinations of two goods that generate the same ...
Topic 4. Utility and consumer choice
... Essential reading: Sloman Chapter 4, Section 4.1 [read Section 4.3 for Monday’s lecture] ...
... Essential reading: Sloman Chapter 4, Section 4.1 [read Section 4.3 for Monday’s lecture] ...
Prof. Blume's notes
... points are to the right, but if two points are equally far to the right, the top point is better. This order has no utility representation. To see why, choose two distinct points on each vertical line. Suppose there were a utility representation U . The top point tx on the line with first coordinate ...
... points are to the right, but if two points are equally far to the right, the top point is better. This order has no utility representation. To see why, choose two distinct points on each vertical line. Suppose there were a utility representation U . The top point tx on the line with first coordinate ...
Chapter 5 - Consumer Choice
... – The price of one good relative to the price of another – The slope of the budget line indicates the spending trade-off between one good and another • Amount of one good, that must be sacrificed in order to buy more of another good • If PY is the price of the good on the vertical axis, then the slo ...
... – The price of one good relative to the price of another – The slope of the budget line indicates the spending trade-off between one good and another • Amount of one good, that must be sacrificed in order to buy more of another good • If PY is the price of the good on the vertical axis, then the slo ...
Individual Rights and the Social Good: A Choice
... asks "if it is formally possible to construct a procedure for passing from a set of known individual tastes to a pattern of social decisionmaking, the procedure in question being required to satisfy certain natural conditions." 25 A society has many different procedures to generate its decisions; so ...
... asks "if it is formally possible to construct a procedure for passing from a set of known individual tastes to a pattern of social decisionmaking, the procedure in question being required to satisfy certain natural conditions." 25 A society has many different procedures to generate its decisions; so ...
util - Pearson
... best they can. Suppose a firm has a fixed budget of $200 to spend on punch and cookies for its holiday party. • The price of punch is $2 per cup and the price of cookies is $1 per cookie; both goods will, of course, be provided free of charge to workers at the party. • The firm’s objective is to max ...
... best they can. Suppose a firm has a fixed budget of $200 to spend on punch and cookies for its holiday party. • The price of punch is $2 per cup and the price of cookies is $1 per cookie; both goods will, of course, be provided free of charge to workers at the party. • The firm’s objective is to max ...
Chapter 3
... pleasure. It is called the marginal rate of substitution of X for Y (MRS x for y). Indifference curves are usually curved in a manner convex to the origin in order to show that consumers gain less benefit from an additional unit of a good if they already have large quantities of the good (diminishin ...
... pleasure. It is called the marginal rate of substitution of X for Y (MRS x for y). Indifference curves are usually curved in a manner convex to the origin in order to show that consumers gain less benefit from an additional unit of a good if they already have large quantities of the good (diminishin ...
Section 2.5 Zeros of Polynomial Functions
... rational zero = p/q, where p and q have no common factors other than 1, and p = a factor of the constant term a0, and q = a factor of the leading coefficient an. To use the Rational Zero Test, . . . ...
... rational zero = p/q, where p and q have no common factors other than 1, and p = a factor of the constant term a0, and q = a factor of the leading coefficient an. To use the Rational Zero Test, . . . ...
IOSR Journal of Economics and Finance (IOSR-JEF)
... monopoly power if the consumers are irrational. Stiglitz (1977) considers a market which is characterized by heterogeneity of consumer’s rationality. They conclude that monopolistic sellers, in such a market, practice price discrimination to split the market and to charge a higher price to the subma ...
... monopoly power if the consumers are irrational. Stiglitz (1977) considers a market which is characterized by heterogeneity of consumer’s rationality. They conclude that monopolistic sellers, in such a market, practice price discrimination to split the market and to charge a higher price to the subma ...
Rational choice theory
Rational choice theory, also known as choice theory or rational action theory, is a framework for understanding and often formally modeling social and economic behavior. The basic premise of rational choice theory is that aggregate social behavior results from the behavior of individual actors, each of whom is making their individual decisions. The theory therefore focuses on the determinants of the individual choices (methodological individualism).Rational choice theory then assumes that an individual has preferences among the available choice alternatives that allow them to state which option they prefer. These preferences are assumed to be complete (the person can always say which of two alternatives they consider preferable or that neither is preferred to the other) and transitive (if option A is preferred over option B and option B is preferred over option C, then A is preferred over C). The rational agent is assumed to take account of available information, probabilities of events, and potential costs and benefits in determining preferences, and to act consistently in choosing the self-determined best choice of action.Rationality is widely used as an assumption of the behavior of individuals in microeconomic models and analyses and appears in almost all economics textbook treatments of human decision-making. It is also central to some of modern political science, sociology, and philosophy. A particular version of rationality is instrumental rationality, which involves seeking the most cost-effective means to achieve a specific goal without reflecting on the worthiness of that goal. Gary Becker was an early proponent of applying rational actor models more widely. Becker won the 1992 Nobel Memorial Prize in Economic Sciences for his studies of discrimination, crime, and human capital.