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Economic Assignment Solved

   

Added on  2021-04-16

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Running Head: ECONOMIC ASSIGNMENT Economic AssignmentName of the StudentName of the UniversityAuthor note
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ECONOMIC ASSIGNMENT 1Table of ContentsAnswer 1..........................................................................................................................................2People are rational.......................................................................................................................2People respond to Economic Incentives......................................................................................2Optimal Decisions are taken at the Margin.................................................................................3Answer 2..........................................................................................................................................3Different type of product and elasticity.......................................................................................4Determinants of income elasticity of demand.............................................................................6Reference list...................................................................................................................................8
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ECONOMIC ASSIGNMENT 2Answer 1 People are rational In the economy people always makes rational choices. Given limited resources, theindividual takes optimal decisions. The assumption of rationality does imply that everyoneknows everything and or economic agents always takes best decision. The economist does notassume that individual or firms uses all the available information in order to fulfill their goals.The rational individual makes a cost-benefit analysis and choses the action only when theresulted benefit of the actions outweigh the associated cost (Fine 2016). For example, supposethat a software company charges a price of $250 for software. Then it is assumed that managersof the company set this price using standard profit maximization theory and makes a rationalchoice of price. People respond to Economic Incentives The action of an individual in the economy is guided by various incentives. It isemphasized that firms and consumers in the economy respond to the economic incentives.Incentives induce a person to act or involve in certain activity. The rational people always taketheir decision with respective cost benefit analysis. Therefore, they respond to incentives. Theincentives can come with either a positive or a negative intention affecting decision in negativeor positive way (Baumol and Blinder 2015). One clear example of the model that people respondto incentive is retirement. If a company raises the age of retirement, then many people whowould otherwise take a break from work life continue to work. The incentives of working is theearned remuneration from the current job position. People obviously prefer to enjoy retired life.
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