1.2 HOW MARKETS WORK Flashcards
1
Q
Rational Decision Making
A
Economics agents are able to rank the order of different outcomes from an action in terms of their net benefit to them and will then act to maximise their net benefits.
2
Q
What do specific agents want to maximise?
NEO CLASSICAL THEORY
A
CONSUMERS - Economic welfare and utility.
FIRMS - Rewards for ownerships e.g profits
GOVERNMENTS - Maximise welfare of the citizens
3
Q
Evaluative Points About Maximisation
A
Neo - Classical theory recognises the assumptions are simplistic.
-Managers could make self benefiting decisions rather than maximise the shareholders gains.
- Corrupt governments
4
Q
Marginal Utility
A
The utility gained of consuming the next unit.
It diminishes the more you consume.
5
Q
A
