Theme 1.2.1 Rational decision making (unit 7)

Question 1

Define rational.

Answer 1

Where an individual, households or firms can order all of the options available to them in order of most beneficial to them.

Question 2

What is the neo-classical theory?

Answer 2

It is a theory of economics which typically starts with the assumptions that economic agents will maximise their benefits and act rationally, and which develops how resources will be allocated in markets and at what price through the forces of demand and supply; the margin is a key concept in a neo-classical theory.

Question 3

What is microeconomics?

Answer 3

The study of behaviour of individuals or groups such as consumers, firms, or workers - typically within a market context .

Question 4

What is macroeconomics?

Answer 4

The study of the economy as a whole, including inflation, growth and unemployment.

Question 5

What is economic welfare?

Answer 5

It is the level of wellbeing or prosperity or living standards of an individual or group of individuals such as a country.

Question 6

Utility of economic welfare.

Answer 6

The satisfaction or benefit derived from consuming a good or a set of goods.