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Showing posts with the label shifts and movements (economics)

Decision Making as Output and Bounded Rationality

  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

Notes on Economics- Shifts and Movements

  There have been recent posts that have discussed certain dimensions of economics. Economics as we have noticed in the past posts is more about behaviour that anything else. It is about responses of economic agents manifest to various stimuli. These responses do not follow a necessary pattern but certain patterns can be deduced. At the core of economic thinking lies a construction of a relationship between buyer and seller. This construction was discussed at some length in an earlier post. These relationships are essentially an interaction between the terms of exchange of a good and the ability and willingness on the buyer and the seller to exchange the goods.   There must be a decision in the first place to produce a good. This implies the following questions need to be answered. Firstly, what has to be produced? Secondly, how to produce the same? Thirdly, it needs to factor in for whom to produce. Having grappled with these questions, there must exist a willingness and desire on