Rational Decision Making Flashcards
1
Q
What do we assume about people?
A
- People aim to maximize their own welfare/satisfaction
- Have limited income and allocate money in order to give them the highest satisfaction
2
Q
What do we assume about producers/firms?
A
- They wish to maximize profit
- Government wishes to improve the social and economic welfare of citizens
3
Q
What can consumer satisfaction be called?
A
Surplus
4
Q
Why are Economic agents not always rational?
A
- Are influenced by their social networks
- Lack of self control and seek immediate satisfaction
- Have limited capacity to calculate all costs
- Have a strong default to maintain the normal.
