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Showing posts with the label marginal utility

Decision Making as Output and Bounded Rationality

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  The classical economics theories proceed on the assumption of rational agents. Rationality implies the economic agents undertake actions or exercise choices based on the cost-benefit analysis they undertake. The assumption further posits that there exists no information asymmetry and thus the agent is aware of all the costs and benefits associated with the choice he or she has exercised. The behavioral school contested the decision stating the decisions in practice are often irrational. Implied there is a continuous departure from rationality. Rationality in the views of the behavioral school is more an exception to the norm rather a rule. The past posts have discussed the limitations of this view by the behavioral school. Economics has often posited rationality in the context in which the choices are exercised rather than theoretical abstract view of rational action. Rational action in theory seems to be grounded in zero restraint situation yet in practice, there are numerous restra
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Tastes and Preferences in Economics: Some Notes

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  Tastes and preferences are determinant of demand. The changing taste and preferences determine the changing patterns of demand. If there were to be demand creates supply, it would be reflected through the changing tastes and preferences. An instance would be in order. On September 11, 2020, it marked nineteen years since the two aircraft were hijacked to crash into the World Trade Centre Towers in New York. The Western world was brought to the reality of the gory Islamic terrorism. It is a different matter that war against Islamic terrorism still continues and at times it seems to happen in spits and bursts and not apparent conviction behind the same.   Yet aside from it, was the trauma it created in a whole population in the US. The Americans were terrified without doubt. There were scared to move out, to interact and many having lost their near and dear ones plunged into depression and loneliness. There was certain change in the purchase patterns in the US. Many Americans began
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Romanticizing Poverty

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There is morbid captivation to romanticize poverty, sentimentalise filth and squalor, put rural life on a pedestal, and idealize urban low income neighbourhoods and slums. To a Western tourist, watching from the stands if one can call it so, exhibition of poverty might be a spectacle however morose it might appear. It might not be dissimilar to their melancholic interests in viewing African Negroes brought as slaves and further parading as human travelling zoo.   To add, is the tendency of many Indian commentators not merely to self-flagellate but add a mystique to the business of public celebration of poverty. It would not be wrong to say the advocacy on poverty eradication are its biggest enemies. If poverty were to be zero, perhaps Mother Theresa would be without a job! Paradoxically for the perpetual existence of poverty alleviating organizations, poverty has to be everlasting. To people in poverty, living in over-crowded chawls or slums in cities, inhabiting rural places fa
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Unlimited all the way- Diminishing Marginal Utility in Practice?

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As one walks in to a five star hotel, we find ourselves inclined to try Buffet Meals for a fixed price. Andhra restaurants have become popular for offering unlimited meals. As we visit few amusement parks, we find they charge a fixed entrance fee and let us enjoy unlimited rides. Mobile service providers woo customers by offering unlimited SMS per day at a flat fee. Bangalore Metropolitan Transport Corporation (BMTC) lures us to try its buses with a day pass (unlimited rides for a flat fee for the calendar day). Further for ages we have had the concept of Bus passes for students and frequent users as also the Suburban rail passes in Mumbai and other cities in India.   Internet service providers offer unlimited browsing per month for a flat fee. Unlimited rides in public transports, enjoy unlimited SMS, telephone calls, internet usage or even unlimited cuisine sound attractive and are part and parcel of our daily economic life. Yet step back and wonder what logic prevails here. Th
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